Analysis of Bitcoin Dominance (BTC.D) Data for Market Cap and Realization Cap Conducted by Cryptoslate Suggests Users Are Increasingly Substituting Stablecoins for BTC as a Safe Flight .
Most people are familiar with market capitalization, which is calculated by multiplying the circulating supply by the current token price.
Realization cap is also a valuation metric, but it differs from market capitalization by replacing the current token price with the price when the token last moved. This method is said to give a more accurate measure of valuation as it takes into account and minimizes the impact of irretrievably lost coins.
Glassnode currently estimates that it has around 7 million tokens in possession or lost, which is a significant percentage of its circulating supply.
If a token has never been moved, the realized price of that token is zero, and if the token has not been moved for a long period of time, its impact will be recorded at a price much lower than its current price. Active tokens therefore account for the majority of the realized cap valuation, giving a more holistic and representative figure to market capitalization.
However, the realized upper bound does not distinguish between lost/irretrievable tokens and those in deep storage. So it doesn’t emphasize the impact of lost/irretrievable coins, but it’s still not a perfect metric.
Nevertheless, market capitalization is much more widely used than realized caps. For example, in the calculation of BTC.D.
Bitcoin market dominance
The cryptocurrency market has been at the top of the market for over a year. During this time, BTC.D dropped to 38.9% of his, and he peaked at 48.6% in June following the Terra blast and subsequent safe getaway.
BTC.D is calculated by dividing the cryptocurrency market cap by the Bitcoin market cap. Bitcoin currently holds a 40.7% lead, hovering near cycle lows.
In previous bear markets, BTC.D was much higher, with BTC.D reaching 73.9% in the previous cycle’s bear market.
If we calculate BTC.D using realized cap instead of market cap, the current number is 60%. This is more in line with the expectation that most users will switch to Bitcoin as a safety net during a bear market.
However, similar to the market capitalization method for calculating BTC.D, the realized cap method also shows a much higher percentage (higher than 60%) in past bear markets, where it was around 90%, such as in 2015. showing dominance.
This raises questions about changes in market dynamics in 2022 and 2015.
Rise of stablecoins
Stablecoins are designed to maintain a constant value regardless of cryptocurrency price fluctuations. They provide a means to enter and exit positions while holding capital in the cryptocurrency market.
BitUSD was the first stablecoin to hit the market, July 2014However, it wasn’t until Tether launched in 2015 that stablecoins began to gain traction. Before Tether became popular, investors tended to invest in Bitcoin during bear markets. But starting around 2017, that’s no longer the case.
The chart below shows the Bitcoin:Stablecoin Supply Ratio (SSR) in the macro downtrend since 2018, where the ratio is currently around 2. This metric shows the ratio of Bitcoin supply to BTC-denominated stablecoin supply.
If the SSR is low, this indicates high buying potential in the current stablecoin supply. In other words, a lower SSR means a higher percentage of stablecoins that are sidelined.
Combined with the downward trend of BTC.D, it suggests that stablecoins are becoming the go-to option for a safe getaway.