https://ift.tt/S39wQZb do you make of the BTC Dominance not returning like it did in 2018?

first you must understand what this recently invented idea “btc dominance” is a measurement of. “BTC dominance” is a measure of the bitcoin market cap relative to the market cap of all other “crypto” combined.

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Now you need to understand how a market cap is calculated. A market cap is the total number of shares that exist for a given company multiplied by the price at which the most recent bitcoin transaction completed at. So you see, a market cap is a vague idea along the lines of “what would it cost to buy every single bitcoin at the current price?” that figure would be the market cap. Of course- that’s a misleading statement I made, because just because the most recent transaction completed at that specific price at that specific exchange, that doesn’t really tell us much beyond that itself. Ill give an example:

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today I made up a new type of money. Its called poopbux. part of the design I came up with for poopbux included that the supply of units of poopbux is 1 trillion poopbux. my mommy bought 1 poopbux from me for 1$. so now the market cap of poopbux is $1 multiplied by the supply of poopbux: 1 trillion dollars. my coin is now bigger than bitcoin, and bitcoin dominance goes down a bit more because you just added poopbux market cap to the market cap of all cryptos (in your calculation of so called “bitcoin dominance”)

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hopefully you see the issue here: just cause my mommy paid 1$ for 1 poop buck that doesn’t mean that all poop bux are worth 1$. that’s just a random transaction that occurred it doesn’t necessarily indicate anything at all. Lets do a thought experiment here. I create a crypto exchange. I create a coin and list it on the exchange. I sell the coin back and forth to myself at prices of my choosing, creating the illusion that the value of the currency is rising. You go on the internet and look up the chart of my coin and see it rising fast, you check the market cap its very high.

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Just illustrating the situation for you. there’s potential solutions of course and there’s mitigation strategies but just to come back to a concrete point here: the btc dominance metric should not be assumed to be useful necessarily. And the accuracy or significance of the “market caps” of different “cryptos” in the calculation of btc dominance may fluctuate, some days btc dominance perhaps is a more accurate representation of something and other days it might be a less accurate representation, depending on what coins have recently been invented (and so consequently recently introduced to the calculation of btc dominance presumably) and what proportion of the total market cap of all cryptos they comprise at the time of the calculation on that specific day. in other words, if on the day you check btc dominance I have just invented poop bux and I have just traded 1 poop buck for 1$, making the market cap 1t, well that means the market cap of all cryptos just increased by 1t then. and btc dominance is the market cap of all cryptos compared to btc. So that number (btc dominance) is going to change a lot on that day. Is it meaningful that I sold 1 poopbux for 1$? to my mom? no id say almost objectively no. And yet when you look at btc dominance im sure you’ll agree there seems to be some significant event on the chart on that day. That’s the issue. I understand the desire to have a handy measurement of the size of bitcoin as a percentage of the total size of all “bitcoin like things” combined. I see where that curiosity comes from, and I relate to it. But the metric is simply lacking. I understand why peoples mind goes there though,