It is called “dominance” since Bitcoin was the only cryptocurrency in the market once, and the price movements of all subsequent cryptocurrencies depend on Bitcoin. If we think of the cryptocurrency market as a pie, we can say that the Bitcoin slice is the Bitcoin dominance ratio. But we need to examine the market cap first.
On January 1, 2014, the market cap was $10b, while the daily trading volume was $35m. Let us look at how the $10b market cap was calculated:
Number of Cryptocurrencies in Circulation X Cryptocurrency Price = Market Cap
The value calculated for each cryptocurrency is summed to calculate the value of the entire cryptocurrency market.
For example,
On September 1, 2020, the market cap was $390b, while the daily trading volume was $124b. When the price of Bitcoin at that time is multiplied by the number of Bitcoins in circulation, the result is $216b. The following calculation shows that the ratio of Bitcoin to the total market cap is 55%:
$216b / $390b = 0.55
