Analyzing the Impact of the Halving Effect on Bitcoin Dominance
The highly anticipated 2024 Bitcoin halving is just around the corner, and crypto enthusiasts are buzzing with excitement. While this isn’t the first time Bitcoin has undergone a halving, many believe that this fourth halving will have a more significant impact. One key factor is the changing landscape of the cryptocurrency market, which now includes a surge in alternative cryptocurrencies, or Altcoins. Currently, Bitcoin’s dominance in the market stands at a mere 51.68%, much weaker than in previous halvings. As Altcoins compete closely with Bitcoin for dominance, it raises an intriguing question: how will the upcoming halving affect Bitcoin’s dominance? Let’s delve into the data to find some answers. Are you ready?
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1. Bitcoin Halving: What’s It All About?
Bitcoin halving is a major event that occurs every four years in the Bitcoin ecosystem. It is a fundamental aspect of how Bitcoin functions, involving a reduction in the reward given to miners for adding new blocks to the blockchain. By halving this reward, the supply of new Bitcoins entering circulation decreases, making them more scarce. To date, there have been three halvings, with the next one scheduled for April 19, 2024. The crypto community eagerly awaits the impact of this event on the network and market dynamics.
One of the most sensational questions surrounding the halving is how it will impact Bitcoin dominance.
2. Bitcoin Dominance: What Does It Mean?
Before we address the sensational question of how the halving will affect Bitcoin dominance, let’s first understand what Bitcoin dominance represents. Simply put, Bitcoin dominance refers to the proportion of the total cryptocurrency market value that is attributed to Bitcoin. Currently, Bitcoin holds a dominance of 51.68%, meaning it makes up slightly over half of the entire cryptocurrency market. This dominance also serves as a measure of Bitcoin’s influence and importance compared to other cryptocurrencies, known as Altcoins. A high Bitcoin dominance suggests that investors are primarily focused on Bitcoin. However, the current lower dominance indicates a growing interest in Altcoins and a more diversified cryptocurrency market where other digital assets are gaining traction alongside Bitcoin.
3. Can Bitcoin Halving Impact Bitcoin Dominance?
Undoubtedly, the Bitcoin halving can have an impact on Bitcoin dominance. When the reward for mining new Bitcoin blocks is halved, it affects the rate at which new Bitcoins enter circulation, potentially altering the supply dynamics of Bitcoin. If the demand for Bitcoin remains steady or increases while its supply decreases, its value may rise, attracting more investment. However, as observed in past halvings, this increased interest in Bitcoin doesn’t always translate into a higher dominance percentage. Altcoins may also experience increased attention, leading to a decrease in Bitcoin dominance over time.
4. Analyzing the Impacts of Bitcoin Halvings on Bitcoin Dominance in the Past
Let’s analyze how Bitcoin dominance changed one month and one year after each halving event. The first halving occurred on November 28, 2012, followed by the second on July 9, 2016, and the third on May 11, 2020. We will track these changes using the Bitcoin dominance index to understand the impact of halving events on Bitcoin’s dominance over time.
4.1. Changes in Bitcoin Dominance after the First Bitcoin Halving
At the time of the first Bitcoin halving, Bitcoin was a dominant player in the market, with Altcoins playing a minor role. In the beginning months of 2013, Bitcoin had a dominance of 94.8%, leaving less than 5.2% for others.
Cryptocurrencies
A year after the first Bitcoin Halving (November 28, 2013)
Bitcoin: 89.27%
Others: 10.73%
The data shows that a year after the first halving, Bitcoin dominance slightly decreased to 89.27%, compared to the beginning of that year. This decline allowed others to increase their dominance from 5.2% to 10.73%.
4.2. Changes in Bitcoin Dominance After the Second Bitcoin Halving
Cryptocurrencies
Dominance on July 9, 2016: Bitcoin 83.48%, Others 16.51%
Dominance on August 9, 2016: Bitcoin 80.05%, Others 19.95%
Dominance on July 9, 2017: Bitcoin 45.8%, Others 54.2%
The data shows that just a month after the second Bitcoin halving, Bitcoin’s market dominance dropped from 83.48% to 80.05%. In that same period, others saw an increase from 16.51% to 19.95%. A year after the event, Bitcoin’s dominance in the crypto market fell below the 50% mark to 45.8%, allowing others to climb to 54.2%.
4.3. Changes in Bitcoin Dominance After the Third Bitcoin Halving
Cryptocurrencies
Dominance on May 11, 2020: Bitcoin 66.18%, Others 33.81%
Dominance on June 11, 2020: Bitcoin 64.57%, Others 34.43%
Dominance on May 11, 2021: Bitcoin 42.85%, Others 57.15%
Similar to what occurred after the first and second halvings, a month after the third halving, Bitcoin’s dominance slipped from 66.18% to 64.57%. It then went below the 50% mark to 42.85% after the event. This allowed others to increase their dominance from 33.81% to 34.43% in a month and to 57.15% in a year.
5. Possible Changes in Bitcoin Dominance after the Next Bitcoin Halving
The data below shows the current market dominance indexes of the top cryptocurrencies.
Cryptocurrencies
Market Dominance
Bitcoin: 51.68%
Ethereum: 15.26%
Tether: 4.45%
BNB: 3.4%
Solana: 2.51%
XRP: 1.13%
Others: 21.56%
The data clearly illustrates that Bitcoin currently enjoys an impressive dominance of 51.68%, with Ethereum and Tether following at 15.26% and 4.45% respectively. Others make up 21.56% of the market. If the trends following previous halving events are any indication, Altcoins are likely to experience a significant increase in dominance in the market within a year. Perhaps, they will show a slight increase just a month after the event, followed by a major increase after a year.
Let’s see if the current market trend favors the top competitors of Bitcoin and whether they can take advantage of a possible decline in Bitcoin’s market dominance.
The data below shows the trend observed in the market dominance data of the top five cryptocurrencies, excluding Bitcoin.
Cryptocurrencies
Last Month (March 19, 2024)
Six Months Before (October 19, 2023)
Last Year (March 19, 2023)
Ethereum: 15.64%, 16.6%, 17.83%
Tether: 4.25%, 7.39%, 6.24%
BNB: 3.21%, 2.86%, 4.39%
Solana: 3.1%, 0.91%, 0.7%
XRP: 1.32%, 2.45%, 1.63%
The data shows that the second-largest cryptocurrency, Ethereum, has experienced a slight decline in its market dominance index, from 17.83% last year to 15.64% currently. This indicates that the trend is not entirely unfavorable for Ethereum. On the other hand, Solana has shown an impressive increase in its market dominance index, jumping from 0.7% to 3.1%. It is the only cryptocurrency in the top five that has experienced such significant growth in terms of market dominance. Clearly, the trend is favorable for Solana, unless other factors come into play.
In conclusion, as the 2024 Bitcoin halving approaches, the analysis suggests a potential shift in the dynamics of the cryptocurrency market, with Altcoins poised to gain momentum as Bitcoin’s dominance diminishes. The interplay between Bitcoin’s scarcity and the growing appeal of Altcoins highlights a dynamic landscape where diversification and competition drive innovation and investment. The evolving narrative of the crypto space promises an intriguing journey ahead, marked by change and opportunity.
Tags: Altcoins, Bitcoin