Bitcoin is by far the most popular and largest cryptocurrency in the market. However, Bitcoin is losing market share to rivals like Ethereum, Ripple, Dash, NEM and Lifecoin. At the same time, Bitcoin continues to grow and there are many people who cannot understand how Bitcoin can be losing Market Share and still continue growing.
For them, this is a Paradox which is explained in simple words, in order to assist those who are not so familiar with finance, in the following paragraphs.
Cryptocurrency market is growing exponentially
According to a study conducted by Abeer ElBahrawy and his team at the City University in London the cryptocurrency market is currently going through a period of exponential growth.
In simple words, this means that the growth rate of the cryptocurrency market becomes faster and faster as time passes increasing its size several times. The study also specifies that at the moment the whole cryptocurrency marketplace is worth $56 billion.
The main reason for the exponential growth of the cryptocurrencies is that there is a lot of uncertainty surrounding traditional currencies like the dollar, the euro, and the British pound that investors are turning their attention to alternative investments like cryptocurrencies.
Additionally, cryptocurrencies are becoming more and more acceptable as methods of payment and trade since Japan and other Asian countries have relaxed their policies and made it much easier for people to engage in transactions using digital currencies.
The paradox explained
There are many people who do not understand how Bitcoin is losing market share but still continues to grow. The reason is actually quite simple. The fact that the cryptocurrency market as a whole is growing exponentially helps us understand the paradox better.
The fact that all cryptocurrencies are growing exponentially simply means that investments and new funds entering the market are increasing exponentially.
This is the reason that even though Bitcoin is losing share to its rivals, it still continues to grow.
A simple example can explain this better. Let’s assume that the cryptocurrency market was worth $100 before Bitcoin started losing part of its share. Also, assume that Bitcoin’s share was 80%. This means that it was worth $80.
Let’s assume that now the cryptocurrency market is worth $300 and Bitcoin’s market share is 60%. This means that Bitcoin’s value rose to $180 more than double its value prior to the loss of market share. Of course, these numbers and percentages are just a simple example. However, this is what is happening but at a much larger scale.
Bitcoin holds a reduced market share of a much larger market
Just imagine that the cryptocurrency market is a pie that keeps growing and growing. Bitcoin’s percentage of the pie may have decreased but because the pie became so big, its actual piece more than doubled in actual size.
This is the natural way that a free market economy operates. Those who enter a market first enjoy a large share until newcomers enter the market and start gaining their own market share.
However, in the case of the cryptocurrency market, due to the fact that the whole market is growing exponentially, Bitcoin’s real value is also growing despite the loss in market share because many investors consider it to be a reliable investment.
