Bitcoin, which has a market capitalization of about $830 billion, is ending 2023 as more valuable than the rest of the entire crypto ecosystem. 

According to data from charting platform TradingView, Bitcoin’s dominance, or its percentage of the market cap of all cryptocurrencies, stands at roughly 51%, a more than 20% increase from about 42% at the start of the year.

Bitcoin’s dominance in 2023

Read more: Should First-Time Bitcoin Investors Buy Now or Wait for the ETF?

By comparison, ether, the native token for Ethereum, the second largest blockchain by market capitalization, experienced a decline in its crypto market share, sliding from nearly 20% of the entire crypto space in January 2023 to roughly 17% at press time. 

The rise of BTC in relation to ETH’s market share reduction mirrors ETH’s decline when compared to other primary layer 1 blockchains, said EigenLayer protocol researcher 0xKydo to Unchained on Telegram. EigenLayer, which has been gaining traction, is a new protocol on Ethereum that allows crypto users to restake their liquid staking tokens.

“Market conditions significantly influence this, but Ethereum’s lack of new narratives also plays a part. While Bitcoin generates fresh excitement about Ordinals and BRC20s, Ethereum continues to focus on its roadmap,” said 0xKydo. 

Carlos Mercado, a data scientist at blockchain analytics firm Flipside Crypto, said to Unchained over Telegram that the growth of BTC’s dominance and decline in ETH’s market share stems from regulatory clarity for Bitcoin and the underperformance of Ethereum’s layer 2’s.

“Bitcoin’s regulatory clarity has been a key multiplier for its spot ETF hype (whereas ETH’s spot ETF hype has been suppressed given its chain of tornado cash sanctions, ICOs, NFTs and other tokens perceived to be at regulatory risk) so institutional money is disproportionately flowing in/out of BTC,” said Mercado. 

Mercado added that Ethereum’s “L2 vision has broadly underperformed the narrative. The L2s that exist are incomplete, easily competed with, losing their financial margin, and fracture the ecosystem more than they add to it. Ethereum related blockspace is not scarce the way Bitcoin is perceived to be scarce.” 

Layer 2 blockchains are scaling solutions for Ethereum that aim to significantly increase transaction throughput and decrease transaction fees. 

A Possible Reversal

Despite rising in December to its largest market share — 55% of the entire crypto space — in the past two-and-a-half years, the oldest cryptocurrency has had eight consecutive days of declining market share, starting on December 21. 

This is the longest consecutive daily decline in Bitcoin’s dominance in the past year, with BTC as the only cryptocurrency in the top five by market capitalization to experience a price downtrend in the past seven days. 

0xKydo expects ether’s market share to rebound in 2024 and 2025. Rumors of an ETH ETF and a new narrative emerging from EigenLayer’s popularity may become “the new rallying call for ETH as an asset,” said 0xKydo.

Read more: 2024 Crypto Predictions: Signs Point to Yes