Study shows: Bitcoin actually accounts for over 90% of liquidity when measuring capital flow

An analysis by the cryptocurrency research firm Arcane Crypto shows that Bitcoin's actual dominance is higher than the data commonly reported in the market.

Since the beginning of this year, the market share of Bitcoin has been soaring from the bottom, and most users are familiar with the market share displayed on major data platforms or Coinmarketcap.

By calculating the market value of tokens, multiplying the price by the current supply, and dividing by the total market value of the crypto market, we can measure the dominance of each token. Many traders also use market share to assess the strength of various cryptocurrencies and blockchain projects.

Earlier reports by ABM pointed out that Bitcoin's dominance has reached a new high since 2017, with the previous high dating back to March 2017 at 72.03%, and currently approaching 70%.

However, a study suggests that the current method of calculating Bitcoin dominance in the market has serious flaws, underestimating the relative strength of Bitcoin compared to altcoins in terms of valuation.

The study points out:

Without considering "liquidity," market value becomes a meaningless measure, as projects can easily create a cryptocurrency with a circulation of 10 billion and trade at $3, which would lead to a market value of $30 billion for that project.

Looking at the current $2.66 trillion on the data platform Coinmarketcap, $30 billion represents over 1% of the market share, further inflating the total market value and reducing Bitcoin's dominance.

Therefore, ideally, the spread should be included as a measure, including price fluctuations when executing large orders, and the spread between buy and sell prices. When the fluctuations are too large, it indicates low liquidity, which is the case for many altcoins.

As shown in the figure below, by calculating the trading volume and adjusting liquidity by weighted market value, Bitcoin is more liquid than other tokens, and its market share would rise to over 90%.

Whether using data from CoinMarketCap, including stablecoins in the calculation or not, or only using the "Real 10" trading volume certified by Bitwise, the results all indicate that Bitcoin's market value falls above 90%.

In addition, excluding stablecoins from the calculation can more accurately measure the relative strength between various cryptocurrencies and blockchain projects, as stablecoins are pegged to fiat currencies and do not compete with other cryptocurrencies that need to maintain value.

Overall, a high market value is a good sign but does not guarantee success. However, historical data shows that products with high liquidity and wide adoption often outperform everything else, as seen in cases like Google and Facebook.

Further Reading

• Study: Global Bitcoin Node Ranking, China Ranks Fifth
• Booking.com CEO Believes Cryptocurrencies Will Eventually Be Widely Accepted

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