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Analyst
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A graduate of Montpellier Business School and Paris 1-Sorbonne, with experience in the worlds of banking and insurance, Laurent Pignot maintains such a passion for cryptocurrencies that he aims, one day, to launch a media dedicated to popularizing of these alternative assets. What attracts this fan of sport and gastronomy? As a good representative of his generation, the decentralized and disintermediated dimension of these currencies. What drives it? The adrenaline linked to the investment game.
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While Bitcoin still largely dominates the entire crypto-asset market with a valuation that hovers around $800 billion, just under half of the total digital currency market capitalization, its dominance has never regained its historic levels of 2017. For its part, Ethereum is grabbing market share and slowly catching up with the leader. With more than ten years of existence, would the crypto-queen be ready to let go of her crown? Let’s look at the trends.
Ethereum is gaining ground
In the wake of the leader, ether, the digital currency of Ethereum, has recovered more than 30% of its value in a few days after a long descent into hell of more than 50% in three months. Just like bitcoin, by the way. The correlation between ETH and BTC is well established, the rises and falls are carried out jointly. Nevertheless, as you probably know, the weight of each of them in the total market capitalization of the market differs and has fluctuated strongly over time:
Comparison of market shares between BTC and ETH
December 2017 marks the high point of the bull run that preceded this date with BTC at $20,000 and ETH at $1,350. November 2022 marks the last known high for each asset, this time with BTC equivalent to $69,000, more than +245% since its 2017 level, and ETH at $4,730 with an increase of more than +250% between the two peaks over the same period. In other words, similar performance between the two assets.
We easily notice that the market capitalization of bitcoin has, in the space of 5 years, kept the same piece of the pie, that is 42% of the total market. While at the same time, ether has progressed and grabbed a few crumbs from 16% to 19%. It should be noted that between them, Bitcoin and Ethereum combine, as we have seen above, more than 60% of the total market capitalization. On the other hand, as you can imagine, this distribution has not remained fixed over time. On to the graph, then we comment next:
Dominance of Bitcoin in its market between 2015 and 2022 (expressed in percentage)
Source: Tradingview
As we can see from this graph, bitcoin had a share of over 97% of the total market at the start of 2017, while ether only had 1% on its side. But during the euphoria of late 2017, bitcoin’s position as a leader in a still-nascent market faltered. Its market share has shrunk to “only” 36% of the total market. We also notice on the graph above, that when the market falters downward, the dominance of bitcoin resumes colors. Typically, throughout the phase of “bear market” from 2018-2020, bitcoin had a market share up over 60%, then a new “bull market” intervened, in other words a phase of sustained market growth. Again bitcoin lost ground to 40%
On the Ethereum side, the course is very different, although we don’t yet have enough perspective to really say that ETH is eating away at BTC for the long term.
Dominance of Ethereum in its market between 2017 and 2022 (expressed in percentage)
Source: Tradingview
It is clear that Ethereum is taking more and more space on the market. It must be said that many investors strongly believe in the solution provided by its CEO, Vitalik Buterin. Moreover, although we compare Bitcoin and Ethereum, the functionalities provided by the two blockchains are very distinct. A comparison that will be the subject of a future article. Here we confine ourselves to the performance of the cryptocurrencies associated with the two blockchain infrastructures. It is still difficult to say that Ethereum is truly gaining strength from a market capitalization perspective. On the chart above, ETH is regaining strength as the market as a whole rallies higher. Since 2020, we have not experienced a new long and lasting fall, called “bear market”. At that time, we may or may not observe the resilience of ether.
If BTC and ETH largely dominate the market by attracting the majority of capital, in the meantime, speculators have positioned themselves on more or less obscure assets in the hope of unearthing the new bitcoin. Some have made fortunes, but many have burned their wings. For this second category and to remain optimistic, we could use a famous quote from Nelson Mandela to put into perspective “you never lose, either you win or you learn”. Easier said than done when a position has suffered -90 Let’s get back to our two leaders.
Can the dominance of Bitcoin and Ethereum last?
First of all, and quite naturally, the cryptocurrency market is becoming more democratic and the leaders have to play elbows with their competitors to keep their crown. The crypto environment is becoming more and more competitive.
Evolution of the number of cryptocurrencies between 2013 and 2022
Source: Statista
The number of cryptocurrencies has multiplied by 10 in the space of five years. In other words, there are 10 times more assets to speculate on and which some predict have found the “next bitcoin”. Naturally, the money supply is streaming into all these new alternatives to bitcoin and ether. Although many of them are actually scams-frauds-scams resulting in the ruin of traders-investors of the first hour.
Yes, because it is undeniable. Most players in the market have an appetite for risk. Investors therefore want a return on investment and very few actually hold cryptocurrencies for the project and the underlying technology of each asset. let’s compare the evolution of the top 10 crypto between the 2017 bull run and today:
Top 10 Crypto by Market Cap 2017 – 2022
Source: CoinMarketCap
Four survivors: Bitcoin, Ethereum, Ripple (XRP) and Cardano. Other assets sank to make way for more innovative and nimble crypto-solutions. Nevertheless, our two “dinosaurs” of the crypto ecosystem are still in place and benefit from a “seniority” and therefore a legitimacy that reassures a large part of the market players.
In a recent study conducted by KPMG on the request of ADAN (Association for the development of digital assets), it is mentioned that 8% of French people have already invested in cryptocurrencies with the duo bitcoin and ether which are privileged in terms of ‘investment. It is also mentioned that the French who do not invest in these assets do not do so mainly because they lack knowledge of how they work (48% of respondents). But it’s a safe bet that even those who invest in this market, at least a large part, are acquiring cryptocurrencies without mastering the underlying technology. As we said above, speculation still dominates in this market.
I have to say that Defining the blockchain is not easy and mastering it even less so. Most definitions are limited to the technical characteristics of the technology, themselves often abstract for many of us: “storage technology”, “registration list”, “peer-to-peer system”, “nodes of storage”, “cryptography”, “consensus algorithm”, “decentralized network”… An insider’s language that excludes those who do not master it. We can all describe technologies that are well established today: a car, a space station, a rocket, a bluetooth speaker… The technical understanding of technological objects takes second place to their conceptual and utilitarian understanding. source of fossil or non-fossil energy Blockchain and therefore cryptocurrencies are at this stage.
Once the underlying technology is better understood, which will come through concrete and more palpable use cases, only true blockchain solutions will remain and dominate. For now, Bitcoin and Ethereum retain their leadership status. But maybe we don’t know the best crypto-blockchain solutions yet. These will likely appear in the next few months/years.
As we have seen, the weight of each cryptocurrency and their associated infrastructure is changing very quickly. With the rise of Web3 looming on the horizon, will Bitcoin and Ethereum continue to cement their leadership position? So far we can say yes. But for how long ? I concoct you focus on each crypto infrastructure to better understand them. In the meantime, if you want to know more about this famous Web3, I have started writing a series of articles that popularize and demystify this new world which aims to succeed Web2: Episode 1: Web 3.0 attacking GAFAM?
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