Bitcoin Market Dominance Hits Lowest Level Since 2018

Bitcoin's market dominance has continued to sink—and is currently at its lowest level in years. According to CoinGecko data, today it stands at 37.28%. 

The last time it was this low was back in 2018, during the bear market. It dipped to as low as 33% that year too. 

Market dominance refers to a cryptocurrency's share of the total crypto market cap. The entire crypto market cap right now stands at $2.3 trillion. Bitcoin's market cap right now is $871 billion—quite a bit down from last November, when it was $1.27 trillion. 

The reason for the large drop is simple: investors are looking at the wider market and investing in altcoins—that is, cryptocurrencies other than Bitcoin. Cryptocurrency trader and analyst Alex Krüger told Decrypt that "there's little demand for Bitcoin" from retail investors at the moment.

Retail investors, he says, aren't interested in Bitcoin because it isn't the sort of investment that newcomers to the crypto market will "get rich" from. Institutional buyers such as MicroStrategy, Tesla or Square, on the other hand, may still benefit from large Bitcoin purchases as a hedge against US dollar inflation.

Altcoins, however, tend to be more attractive investments for those looking for large, quick gains. For example, so-called meme coin Safemoon, which some critics have decried as a Ponzi scheme, is right now up 68.3% in the past week.

In fact, the best performing cryptocurrency in 2021 was far from Bitcoin. Rather, investors looked to meme coins, cryptos based on internet jokes and culture, and they exploded in value. Dogecoin clone Shiba Inu, for example, went up 42,349,900% from January to December. The rising value of such coins could help to explain Bitcoin's diluted market share.

Likewise, the growth of decentralized finance (DeFi) and NFT markets, neither of which really exist on Bitcoin, have also helped to spur the rise of competing cryptocurrencies. DeFi refers to projects that want to automate bank-like services, and NFTs—which have become hugely popular among celebrity collectors—are making it easier to buy and sell art and music via blockchain networks.

Both DeFi and NFTs largely run on Ethereum. ETH, the second largest cryptocurrency by market cap, right now has a market dominance of 19.27%. Its dominance has slowly been on the rise since Q4 of 2019 as investors become more interested in DeFi and NFTs.

The growth of these markets also helps to explain the rise of Solana, a blockchain which aims to compete with Ethereum. The price of Solana's native SOL cryptocurrency shot up by more than 11,000% over the last year, and it became the fifth largest digital asset by market cap. 

Both Bitcoin and Ethereum, however, have had sluggish starts to 2022 in terms of price—the two largest digital assets are down 33.7% and 23.6%, respectively, from their all-time highs last year.