There are a few clear to all indicators Bitcoin: the price, the number of coins in circulation and market capitalization. But there is also the index of dominance in the market, that is, the percentage of the total BTC market cap of all cryptocurrencies. Not so long ago we wrote that the index of dominance of Bitcoin fell to a three-month low. But is it really? As a rule, for the monitoring of this indicator analysts use statistics CoinMarketCap. Maybe the dominance of the market is more than percentage?
According to the theory of John-Paul Torgersen, last week, this figure stood at 50 percent. However, such calculations are in fact not reflect the true market situation. He compared 100 cryptocurrencies in the list, on a logarithmic scale. But for more accurate calculations it is necessary to add a further level of liquidity and daily trading volume.
For example, the market capitalization of some of the coins amounted to 0.1% in day-on-year. This can be an indicator of the pitfalls of the market or artificial market capitalization. Now the analyst decided to use Pareto rule of 80/20 and try to multiply the volume by the market capitalization.
Excluding from the statistics minor coins with presumably artificial capitalization and re-calculating the index of dominance of Bitcoin, he got a new figure to 80 percent. Applying the same formula to the top 5 coins, he found that the dominance of the main cryptocurrency and is up to 85 percent.
However, to bury a metric of market dominance on CoinMarketCap still not worth it. It is still useful, but it would be better to rename it to “share of market capitalization”.