Can Bitcoin's dominance as a leading asset be maintained in the long term?

Author: Huang Shiliang

In the past year, Bitcoin's market share advantage in the field of encrypted digital currencies has been expanding. Now it has reached a record high in the past five years, exceeding 63%.

Perhaps this number is the biggest blow to ETH investors, not the price of ETH itself. At least it has hit me to the point where I can almost cry in bed. If I had started to lie flat five years ago, I wouldn't be like this today.

Since the ETH/BTC exchange rate fell by 4%, I kept asking myself, will this thing continue to fall? What should I do? Damn, I was so angry that I kept asking until it was less than 2%, and I was completely speechless.

We need to think about this question seriously. Will Bitcoin's market capitalization lead last for a long time? Forget about whether investing in encrypted digital currencies is just a lie and BTC is pulled up. Don't study anything else.

I want to compare the situation in other fields and see whether leading companies in other industries have long-term dominance.

The easiest thing to think of is of course gold. I asked chatgpt and gemini to investigate the market value distribution of precious metals, as shown in the following table:

Table 1: Market value distribution of precious metals

The dominant position of gold in terms of market value is mainly due to its brand, which has been used as a currency and a means of storing value for thousands of years. Brands are something that precipitate inherent imagination in the hearts of humans, and this barrier is very high.

I feel that Bitcoin is more like this.

The second thing that can be thought of that is worth comparing is the proportion of each country's legal currency in the global foreign exchange reserve currency. Chatgpt and gemini are out again.

Table 2: Global foreign exchange reserve currency structure in the fourth quarter of 2024

The US dollar has an absolute monopoly. The core reason is that the United States is the world's largest economy, the depth of the US debt market is irreplaceable, and the world's major international trade, especially oil, is priced in US dollars. In addition, the auxiliary factors are the US politics, culture, and the Federal Reserve, which are all too awesome.

But the current trend may be that the monopoly of the US dollar will decline, mainly due to the challenge of the RMB.

Compared with Bitcoin's market capitalization share in the field of encrypted digital currencies, Bitcoin does not have the advantage of the US dollar. Bitcoin has not created the most useful things in the blockchain world. On the contrary, Ethereum, the second largest market, is a bit like the US dollar, providing various infrastructure and usage scenarios for the entire industry.

Let's take a look at the situation of major well-known companies.

Please note that for effective comparison, I use the company's "captured value" share, which is directly related to making money, not the market share (concepts such as the number of users) or the distribution of stock market capitalization.

Table 3: Share of well-known companies’ earning power among their peers

From the above three types of cases, we can summarize several major mechanisms for value capture.

Brand and premium: iPhone, Moutai, gold, BTC is undoubtedly this one

Technology/capital barriers: NVIDIA, TSMC

Network effects: AWS, Google

Resource scarcity or sovereign endorsement: gold, US dollar (Bitcoin may be related to this)

Economy of scale: Amazon cloud computing, TSMC wafer foundry, Nvidia GPU

I think the core factor that makes Bitcoin's market value share an absolute leading advantage in the blockchain is: brand.

The ability of brands to capture value in the same industry is 85% for Apple phones and 90% for gold.

If the competition among currencies in the encrypted digital currency industry ultimately depends on brands, then Bitcoin’s current market value of 63% is not high.

If this is the case, ETH Holder will really cry.

But can we believe that brand is the core of currency and blockchain?

Shouldn’t it be decentralization, network effect, user volume, application scenario landing, etc.?

I don’t have a final answer yet.

But never underestimate the value of the brand.