4. Empirical Analysis and Results

4.1 Bitcoin Dominance Trends Over Time

Our first empirical investigation examines the longitudinal evolution of Bitcoin dominance from 2013 to 2025. Figure 1 presents annual average BTC dominance with range bands showing intra-year volatility.

Figure 1: Bitcoin Dominance Evolution (2013-2025)
Source: CoinMarketCap historical data. Chart shows annual average BTC dominance with high/low range bands.
Key Finding 1: Bitcoin dominance exhibits a clear cyclical pattern rather than monotonic decline. BTC.D compressed from 93.3% (2013) to a cyclical low of 39.3% (2022) during peak alt season, but recovered to 59.3% by 2025. This U-shaped recovery pattern suggests cyclically bounded dilution within broader structural pressures.

The data reveals several distinct phases:

4.2 Altcoin Proliferation and Market Fragmentation

The exponential growth in cryptocurrency supply represents the supply-side driver of the Capital Dilution Effect. Figure 2 illustrates the dramatic expansion in both total and active cryptocurrencies.

Figure 2: Cryptocurrency Supply Growth (2013-2025)
Source: CoinGecko, CoinMarketCap. "Active" cryptocurrencies defined here as those with ≥$100k 30-day average daily trading volume.
Key Finding 2: The cryptocurrency universe expanded from 50 assets in 2013 to over 17,000 by 2025—a 340x increase. Even conservative estimates of "active" cryptocurrencies show 300x growth (50 to 15,000 assets), demonstrating sustained market fragmentation.

This explosive growth validates the supply-side component of our CDE hypothesis. The market now offers thousands of competing investment vehicles, each vying for limited investor attention and capital. While most altcoins remain insignificant individually, their collective presence creates a persistent dilutive force by fragmenting the total addressable market. As of November 2025, real-time market data confirms Bitcoin's dominance at 58.72% of the $3.94 trillion total cryptocurrency market cap, with Ethereum holding 12.79% and Solana 2.81%. The altcoin market (excluding Bitcoin) represents $610.9 billion in value, distributed across thousands of assets with varying degrees of liquidity and adoption (Slickcharts, DemandSage, 2025).

4.3 Correlation Analysis: Altcoin Supply vs. Bitcoin Dominance

To test the direct relationship between altcoin proliferation and Bitcoin dominance erosion, Figure 3 presents a dual-axis time series comparing cryptocurrency supply growth with BTC.D trends.

Figure 3: Inverse Relationship Between Altcoin Supply and BTC Dominance
Dual-axis chart showing negative correlation between rising altcoin count (left axis) and declining BTC dominance (right axis, inverted scale).
Key Finding 3: Visual inspection reveals an inverse relationship between altcoin supply growth and Bitcoin dominance, with a moderately strong negative sample correlation in our dataset (see the Figure 3 caption for the computed r). This supports the CDE hypothesis, though the relationship is clearly moderated by cyclical market dynamics.

However, the correlation is not perfectly linear, suggesting that other variables moderate the relationship:

4.4 Year-over-Year Dominance Changes and Market Cycles

Analyzing year-over-year changes in Bitcoin dominance reveals the cyclical nature of capital dilution effects.

Figure 4: Year-over-Year Changes in Bitcoin Dominance
Positive values indicate BTC dominance gains; negative values indicate alt season dilution effects.

The bar chart clearly illustrates alternating phases of dilution and recovery:

Key Finding 4: Capital Dilution Effect operates cyclically rather than linearly. During risk-on bull markets, BTC.D declines sharply as speculative capital chases altcoin gains. During risk-off corrections, natural market mechanisms eliminate weak projects and capital reconsolidates in Bitcoin, causing BTC.D recovery.

4.5 Cryptocurrency User Distribution Analysis

Beyond market capitalization metrics, examining user distribution provides insights into fundamental adoption patterns. Table 1 presents global cryptocurrency ownership data for 2023-2024.

Figure 5: Cryptocurrency User Distribution (2023-2024)
Source: Global cryptocurrency surveys and exchange data. Shows Bitcoin maintains majority user base despite altcoin proliferation.
Year Total Crypto Users (M) Bitcoin Owners (M) Ethereum Owners (M) BTC Users % ETH Users %
2023 583 298 125 51.1% 21.4%
2024 659 337 142 51.2% 21.7%
Key Finding 5: Bitcoin maintains remarkably stable user dominance at ~51% despite massive altcoin proliferation. This suggests that while capital may be diluted across thousands of assets, fundamental user adoption and trust remain concentrated in Bitcoin, supporting its long-term store of value thesis.