Bitcoin, the "granddaddy" of the world's cryptocurrencies, was launched to the public in 2009 by a developer or group of developers known anonymously as Satoshi Nakamoto. Since then, Bitcoin has remained the world's highest in terms of share and value, despite constant competition. The technology underlying Bitcoin has inspired the development of thousands of emerging cryptocurrencies, all collectively known as tokens or torrents.
Compared to other digital assets, Bitcoin continues to hold a high position and is a bellwether for the entire cryptocurrency market. Traders and analysts use the Bitcoin Leadership Index, also known as the "BTC Leadership Index", to measure Bitcoin's market capitalization within the larger cryptocurrency market.
What is the BTC Leaders Index?
The BTC Leadership Index refers to Bitcoin's share of the overall cryptocurrency market capitalization and is calculated by dividing the BTC market capitalization by the total cryptocurrency market capitalization.
Why is the BTC Leaders Index important? Traders have long used the BTC Leaders Index to benchmark Bitcoin and determine whether the cryptocurrency is in an uptrend or a downtrend. One of the prevailing views is that if cottage coins are on an uptrend, the cryptocurrency market will enter a bull market. For example, in 2017, the sharp decline in the BTC Leading Index coincided with a spike in cottage coin prices (rather than a decline in BTC prices), timed to coincide with the market as a whole entering a bull market.
Cryptocurrencies go from one to a thousand
The first cryptocurrency, Litecoin, was launched in 2011, and in 2013, which Forbes magazine called the "Year of Bitcoin", the number of emerging cryptocurrencies entering the market began to increase rapidly. By May 2013, at least ten tokens had appeared in the cryptocurrency market, including Litecoin (LTC) and Ripple (XRP).
Meanwhile, the price of Bitcoin gradually soared as more and more investors made their first forays into the digital asset space. However, even with strong competition from newcomers, the BTC leadership index remained at around 95% during this period.
The advent of Ethereum
In 2015, Vitali Butlerin led the development team that launched the Ethernet (ETH) network. Ether competed against Bitcoin, aiming to create a blockchain that not only catered to financial services such as money transfers, but also had a rich set of use cases. Bitcoin was unaffected by the competition from Ether's native token, Ether (ETH), and continued to hold 90-95% of the cryptocurrency market. It was only in 2017 that the situation changed with the rapid growth of Initial Token Offerings (ICOs).
The Initial Token Offering (ICO) boom
Initial token offerings (ICOs) were a popular method of crowdfunding for early cryptocurrency projects and became a mainstream trend between 2017 and 2018. During this period, approximately 2,000 separate initial token offerings emerged, raising a cumulative total of over $10 billion. Money began to flow from Bitcoin to the many cryptocurrencies that were making their debut at the moment. While some investors were interested in certain interesting but untested use cases, another wave of investors were more interested in profiting from the highly volatile prices.
The cryptocurrency winter of 2018
The initial token offering boom, while gaining traction in the cryptocurrency space, was ultimately short-lived. Investors gradually realized that many initial token offering projects either lacked a core foundation or had questionable business practices. Some projects even became targets of regulatory scrutiny and other authorities in the US. This escalating negative sentiment eventually enveloped the entire industry, sending prices across the cryptocurrency market into a prolonged period of decline and stagnation.
Bitcoin market heats up
The value of numerous cryptocurrencies was increasingly falling and investors were generally disillusioned with initial token offerings. By the last few months of 2018, the BTC leading index gradually recovered to over 50%.
Bitcoin prices recovered slightly in 2019, ending the year trading at around $7,000, while the BTC Lead Index peaked at around 70% in September. However, the market for digital assets remained relatively static until a new crown epidemic ravaged the world in 2020.
A market in the grip of an epidemic
Since 2020, the cryptocurrency market has seen an unprecedented bull market after a brief period of overall decline caused by the impact of the epidemic. Meanwhile, the BTC Leading Index reached 72% in January 2021, a new high since 2017, before falling to 39% in mid-2021.
With the lingering epidemic looming, people stuck at home with nothing to do are turning to day trading and investing to pass the time. At the same time, in an attempt to mitigate the economic downturn caused by the epidemic, governments handed out cash subsidies to stimulate their deeply troubled economies. For the first time, retail traders are investing a larger proportion of their money in the equity, foreign exchange or cryptocurrency markets.
In the second half of 2020, high-risk cryptocurrencies gradually gained widespread attention from retail investors as the media collectively focused on the cryptocurrency space, with newcomers looking for quick profits rushing in. For example, in 2021, the price of Shikari coin (SHIB) shot up more than 4,000 times.
In addition, decentralized finance (DeFI) and NFT are predominantly found in competing blockchains like Ether and Solana (SOL), and the rapid growth of these innovations has resulted in Bitcoin losing a large share of the market. For example, Solana's underlying technology gained the attention of many institutional and retail investors, and the price skyrocketed from $1.50 to a new all-time high of $250 in 2021.
Since then, the BTC Leaders Index has struggled to climb past 50%. the BTC Leaders Index's recent slow growth may be linked to ETH 2.0, the long-awaited proof-of-stake shift in Ethereum, and the ongoing bear market.
