The top five tokens make up 75% of the total crypto market cap

The cryptocurrency market is highly disbalanced: the top five cryptocurrencies account for 75% of the total market capitalisation. For context, there are more than 9,500 cryptocurrencies out there, and almost all of them have tiny market caps. Only the top cryptocurrencies carry a significant weight. As the graph below shows, Bitcoin accounts for more than half of the capitalisation of all cryptocurrencies.

Factors driving market growth

Market structure

It is important to draw attention to the structure of the cryptocurrency market. In April 2021, Bitcoin (BTC) accounted for 53% of the total cryptocurrency market cap. Meanwhile, the second largest, Ethereum (ETH), accounted for almost 13% of the total market capitalisation. It is very interesting to note that the increase in total crypto market capitalisation tends to cause the share of the biggest cryptocurrencies in the total market to shrink.

The cryptocurrency market is generally highly fragmented. Almost all of the market capitalisation is concentrated among a minority of cryptocurrencies. Statistically, the top five cryptocurrencies account for more than 75% of the total market capitalisation (spring 2021). Similarly, the top ten cryptocurrencies make up 81% of the capitalisation, and so on. Note that the top ten cryptocurrencies represent only 0.11% of all 9,250 cryptocurrencies in existence at the beginning of 2021!

The graph below shows the share of the top 17 cryptocurrencies by total market capitalisation in April 2021. This graph perfectly illustrates the wide gap that remains in the distribution of capitalisation. Note that this graph does not include the current position of the Dogecoin (DOGE), which made a meteoric breakthrough after this data was collated.

Distinguishing the capitalisation categories…

From these statistics, we can distinguish large groups of cryptocurrencies according to (obviously) highly variable criteria. Cryptocurrencies can be divided into five main categories:

The huge caps: This is mainly Bitcoin and Ethereum. The first two cryptocurrencies account for almost two-thirds of the total capitalisation. More generally, the huge caps exceed 5% of the total market cap.

The big caps: These are cryptocurrencies whose share in the total capitalisation lies between 1% and 5% of the total. In April 2021, this means just five cryptocurrencies (including binance coin [BNB] and polkadot [DOT]).

The mid caps: These are cryptocurrencies that account for about 0.5% to 1% of the total capitalisation, so ten cryptocurrencies in April 2021.

The small caps: Sometimes referred to as ‘little caps’, these are, well, smaller projects. These cryptocurrencies make up between 0.05% and 0.5% of the total capitalisation, meaning those valued between $1 billion and $10 billion. These are mainly the top 100 crypto projects on Coinmarketcap.

The micro caps: These are the thousands of cryptocurrencies with a capitalisation under $1 billion, or about 0.05% of the total capitalisation. These small cryptocurrencies are very competitive, vying for investment and attention, and often carry much more risk.

There are many lessons we can learn from this distribution:

  • It is almost impossible for micro caps to perform very strongly and become highly successful cryptocurrencies.
  • The highest performing cryptocurrencies are the small and mid caps. These are cryptocurrencies that propose new innovations that are fundamentally useful and visible to a wide audience, putting them in competition with the, say, top 5-10 crypto projects.
  • The huge caps remain dominant and dictate the global market. The overall market trend (bullish or bearish) is determined by the price action of the huge and big caps, but mostly just Bitcoin.

Dilution of capitalisation

The overall expansion of the cryptocurrency market tends to reduce the share of the largest cryptocurrencies in the total capitalisation of the market. This crypto investing phenomenon resembles in some ways the craze around dotcom companies in the late 1990s. Hundreds and hundreds of cryptocurrencies are created every year, most without any visibility, and this only gets stronger as the total capitalisation of the market grows.

The fact that the expansion of the cryptocurrency market causes mid cap cryptocurrencies to pump can be explained by a number of factors:

  • The democratisation of cryptocurrencies creates competition among the major market-leading crypto projects. Many cryptocurrencies have emerged promising to supersede Bitcoin, such as Ethereum or Ripple. These suck up additional demand that reduces the overall size of Bitcoin.
  • The overall growth of the market favours mid cap cryptocurrencies more than large cryptocurrencies in the short term. The influx of liquidity cascades down and gradually benefits smaller cryptocurrencies.

At the beginning of the year, Bitcoin’s share of the total market cap was almost 66%, now it is only 53%. This is called a ‘dilution’ of cryptocurrency capitalisation, something that occurs with the expansion of the market. However, the inflow of capital into the market remains concentrated among intermediate cryptocurrencies, and does not allow small cryptocurrencies to stand out.

The importance of speculation                                   

Cryptocurrencies and speculation

It is undeniable that the weight of speculation in the cryptocurrency market is huge. Nonetheless, there are many projects that are sources of great innovation and whose enthusiasm for the values of crypto reflects broader expectations for these new technologies to be democratised.

For example, as long as Bitcoin’s price remains greater than $30,000, it is overvalued, and speculation is key to keeping its price up. The importance of cryptocurrency speculation can also be explained by the tight correlation between cryptocurrency prices and volatility.

The fact that Bitcoin is overheated is a direct result of institutional decisions. In the cryptocurrency world, institutions have the power to move prices sharply up or down. After a certain price, there comes a time when institutions’ positions start to give diminishing returns. This can be seen in the saturation of Bitcoin: a 1,000 times increase in the Bitcoin price is much harder to bring about than a 1,000x in a newly minted token, for example. The speculative nature of cryptocurrencies also explains the fact that all cryptocurrencies benefit from overall market growth.

The example of Dogecoin (DOGE)

Dogecoin is the most famous example of excessive speculation on cryptocurrencies. The fourth largest cryptocurrency in the world, DOGE boasts a market cap of nearly $72 billion (at the beginning of May 2021), which is as much as that of Reckitt Benckiser! Moreover, Dogecoin has dethroned the likes of Ripple (XRP) in terms of capitalisation. In July 2020, the number of active daily DOGE addresses was 86,000 (up 40% from June 2020), compared to 910,000 for Bitcoin and 410,000 for Ethereum.

For context, Dogecoin was originally a joke created by Billy Markus to poke fun at cryptocurrencies in general. The ascent of Dogecoin took hold for the first time in December 2013. Since then, DOGE has become an entirely community-based cryptocurrency that has captivated Elon Musk. In recent months, Elon Musk has become a guru of cryptocurrencies, but mainy Bitcoin and Dogecoin. In short, Dogecoin is the perfect illustration of the way investors get drawn into the expanding cryptocurrency market, and then look for smaller coins to maximise their gains.

The example of Ethereum and SwissBorg (CHSB)

In recent weeks, Ethereum has massively outperformed Bitcoin. Ethereum passed the symbolic threshold of $4,000 and even exceeded Mastercard’s capitalisation. Ethereum’s capitalisation in May 2021 stands at $404 billion, something that isn’t surprising as it is used by many mid cap tokens and has a range of benefits. This allows Ethereum to profit more sustainably from the overall expansion of the market.


The graph above shows the ETH/BTC ratio. We can see two things:

Firstly, Ethereum is a long-term winner overall. Despite sometimes more volatile movements, its average annual performance still posts new highs.

Secondly, the Ethereum dumps harder against Bitcoin when the overall crypto market is in decline (2018-2019, for example). Conversely, Ethereum stands to gain a great deal from periods of expansion in the cryptocurrency market (2017-2018 and 2020-2021).

Other cryptocurrencies can outperform even ETH. This is due to a quite simple effect. If an institutional investor decides to invest $100 million in Bitcoin, the effect on the BTC price will be drastically different to the effect of investing that same $100 million in a top 100 cryptocurrency. This is the case for CHSB, which is mooning as a result. This token is associated with SwissBorg, a cryptocurrency investment platform, and has seen lots of institutional buzz as of late.

Plus d’actions

Hi, Привет & Salut! I’m interested in two things: crypto and languages. So I’m really excited to be part of the multinational CoinTribune team, where I can share my crypto knowledge with people from around the world, one article at a time.

The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.
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