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While this is not necessarily true in all cases, the public perception is strongly skewed toward trusting the fiat reserves. So, when Bitcoin’s literal dominance is challenged in any way, it is an excellent signal for new investment opportunities. Generally, the BTC dominance ratio falls whenever there is an ongoing bull market or the emergence of a new revolutionary coin or something else that is equally significant.

Is BTC dominance a reliable metric for trading?

For instance, a significant technological breakthrough in an altcoin project or a favorable regulatory development could trigger an Altcoin Season, even if BTC dominance is high. It’s also worth noting that BTC dominance can be influenced by a variety of factors. These include market sentiment, investor behavior, regulatory news, technological advancements, and the overall performance of the crypto market. The concept of BTC dominance is important because it helps investors and traders understand the market dynamics and sentiment. A high BTC dominance indicates that investors are favoring Bitcoin over altcoins, while a low BTC dominance suggests that investors are moving towards altcoins. Finally, an obvious factor is the number of new tokens and projects being launched in the market.

Use BTC Dominance to Determine the Strongest Trend

The long-term strategy can be profitable if the value of Bitcoin continues to increase over time. Generally, the historical performance of Bitcoin dominance is a very important metric to consider when evaluating the general health of the crypto market. You can easily track Bitcoin dominance using a chart like the one provided by TradingView. For instance, if the chart shows 43%, it means Bitcoin is currently worth 43% more than all other cryptocurrencies combined.

BTC Dominance: How It Impacts The Crypto Market

For instance, when Bitcoin dominance increases, the total market share of other cryptocurrencies reduces in value. Another trend affecting Bitcoin’s dominance is whether the market is bearish or bullish. In the past, bull markets have indicated falling Bitcoin dominance as investors search for high-yielding altcoins.

Bitcoin dominance cycle

Bitcoin Dominance may be impacted by technological developments in the cryptocurrency ecosystem as a whole. Bitcoin may lose prominence if new blockchain technology, consensus methods, or cutting-edge altcoin features are introduced. A high Bitcoin Dominance indicates that bitcoin is a dominant player in the crypto market. In contrast, a low Bitcoin Dominance suggests that other cryptocurrencies are gaining in strength compared to bitcoin. Another factor that influences Bitcoin dominance is broad crypto market movements.

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In particular, during a bear market or other periods of volatility, stablecoins are frequently utilized as a cryptocurrency perceived to be less volatile than many others. This can cause investors to turn to altcoins, NFT projects, and riskier assets in the hope of seeing big returns. Given its huge market capitalization, which often exceeds all of the largest altcoins combined, it’s no exaggeration to say Bitcoin exerts a massive influence on the entire crypto market. Investors can identify such periods by using the TradingView Bitcoin Dominance Index. This compares the BTC market capitalization relative to other cryptocurrencies.

Altcoins Fluctuation in Market Cap

• In the case of Bitcoin, determining its market capitalization involves the multiplication of the prevailing price by the total number of BTC that have been mined up to this point.
• However, certain altcoins have been able to outpace Bitcoin in terms of market capitalization, such as Ethereum.
• “Whales,” or large holders of Bitcoin, have the power to manipulate currency valuations.
• Furthermore, trading, investing, and converting Bitcoin into other cryptocurrencies are made simple by its liquidity and availability on a variety of cryptocurrency exchanges.
• To further visualise this concept, let’s swiftly calculate Bitcoin’s market cap by utilising the circulating supply and Bitcoin’s price.
• This figure indicates the cryptocurrency’s popularity among investors and its position relative to other coins in the crypto market.

This Technical Analysis Widget is an advanced tool that displays BTC Dominance over time and how to calculate bitcoin dominance. This may not necessarily be a bad thing, as some analysts are of the view that a growing altcoin market share is a signal of a maturing market as more participants create a more robust ecosystem. Bitcoin’s blockchain is generally less efficient than some other kinds of blockchains in the crypto space, which means that it can take a longer time to process transactions. This can be a major disadvantage for crypto traders who need to make fast trades.

How to use Bitcoin dominance

If the BTC dominance is falling, this could signal an altcoin season, and traders may decide to invest in altcoins. Conversely, a rising BTC dominance could indicate a favorable market for Bitcoin. Altcoin season occurs when altcoins experience a significant rise in prices while Bitcoin price stalls for a long period. This often leads to investors plowing their funds in these altcoins and kickstarting an uptrend in prices. Market capitalization represents the aggregate value of a particular asset in circulation.

Derivatives market

However, with the addition of more altcoins, the dominance of Bitcoin has been negatively impacted, especially as these assets increase in adoption and price. This formula compares the market capitalization of bitcoin to the combined market capitalization of all cryptocurrencies. By dividing the market cap of bitcoin by the total market cap of the crypto market, we obtain a percentage that represents bitcoin’s dominance over the entire space.

What Factors and Variables Impact the BTC Dominance?

Bitcoin is frequently positioned as a hedge against economic uncertainty, and in difficult economic times, investors may devote more capital to the cryptocurrency, further solidifying its dominance. On the other hand, Bitcoin Dominance may fall if there is a trend supporting particular altcoins as money moves into those other assets. Conversely, sinking Bitcoin dominance reflects increasing market euphoria and fosters traders’ desire to speculate on high-flying altcoins in a risk-on appetite. So, whether trading strictly Bitcoin or diving into altcoin assets, keeping a pulse on Bitcoin dominance keeps traders informed on where capital is concentrating next within the dynamic crypto economy. Analyzing Bitcoin dominance patterns and inflection points allows traders to pinpoint the stage of market cycles. It serves as an analytical tool to find optimal times to take profits or enter new positions.

The Relationship Between BTC Dominance and Market Cap

However, it’s important to consider this metric alongside other factors such as market liquidity and global economic conditions. Several factors can affect Bitcoin dominance, including market volatility, the performance of altcoins, and the popularity of stablecoins. Market volatility can result in drastic changes in the market caps of all cryptocurrencies, including Bitcoin. Altcoin performance and the introduction of new altcoins can decrease Bitcoin’s dominance, and the increased use of stablecoins can also impact Bitcoin’s share of the total market. When the market is on an upswing, traders may be incentivized to shift their assets from stablecoins to more volatile options offering greater trading opportunities, such as bitcoin. However, emboldened traders might also opt for riskier alternatives, infusing liquidity into altcoins that exhibit even higher volatility than BTC.

As the cryptocurrency market continues to evolve, understanding BTC Dominance can be a powerful strategy for navigating the complex world of digital assets. Despite these limitations, BTC dominance remains a valuable tool for gauging market sentiment, guiding investment strategies, and understanding market cycles. It’s a metric that can provide valuable insights for both seasoned traders and newcomers to the crypto market. BTC dominance is a metric that provides insight into the market share of Bitcoin relative to the cumulative market share of all other cryptocurrencies combined.

• Starting strong, then hitting two rocky sections of its young existence, crypto is in an excellent position to thrive in 2024.
• This meant Bitcoin would be the first cryptocurrency that would be truly decentralized — a feat that its predecessors failed to achieve.
• As more miners join the network and computational power increases, the difficulty of the hash puzzle increases accordingly.
• By limiting the maximum number of Bitcoins that can ever exist, Bitcoin ensures scarcity, similar to precious metals like gold.
• By analyzing BTC dominance and price trends, investors can make informed decisions about allocating more to BTC or altcoins.
• The market value of USDC, the second-largest stablecoin, is about $25 billion.

Hundreds of flashy crypto projects with multi-billion dollar valuations sprang up seemingly overnight. To use it correctly, traders need to factor in every aspect of what is going on “under the hood” in the relationship between Bitcoin and altcoins. They also need to be prepared for surprises which may turn a dominance trend on its head in a moment. It used to be almost 100%, as crypto traders in the early years had little faith or even interest in diversifying away from already highly-volatile BTC. In the past years, traders have studied the dynamics of Bitcoins market share to understand the driving forces behind it, and whether it can be used to allocate capital more efficiently.

What will happens if BTC dominance goes down?

• Although perhaps never reaching its pre-2017 heights again, many believed that BTC would remain the dominant crypto.
• However, fluctuation in this metric does not necessarily correlate with its intrinsic value, nor does it imply a rapid capital inflow.
• When the majority of nodes reach a consensus that the block is valid, it will be added to the blockchain.
• On the other hand, a decrease in dominance Bitcoin signals a growing interest in alternative coins (altcoins) and riskier investments, which is characteristic of bull market periods.
• However, this is also influenced by market liquidity and technological advancements in altcoins.

For crypto investors and traders, monitoring bitcoin dominance can be a useful tool for making informed decisions about their trading strategies and portfolio allocations. By observing changes in bitcoin dominance over time, market participants can gauge the market’s sentiment towards bitcoin compared to alternative cryptocurrencies. This makes Bitcoin dominance a useful analytical tool for investors to determine market sentiment when trading cryptocurrency. However, it should only be used within the context of market trends as a whole.

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Virtual Assets are volatile and their value may fluctuate, which can lead to potential gains or significant losses. If you do not understand the risks involved, or if you have any questions regarding the PrimeXBT products, you should seek independent financial and/or legal advice if necessary. In the early days of cryptocurrency, the BTC dominance was extremely high, as the cryptocurrency space was small and consisted of Bitcoin and a handful of smaller projects.

BTC Dominance Can Indicate Rising Interest In Altcoins

Bitcoin dominance can be used to predict the market condition because it generally responds to investor’s appetite for altcoins. If more people are willing to invest in altcoins, it tends to be unfavorable to Bitcoin dominance. Bitcoin is the most secure and most reliable cryptocurrency, with its blockchain equipped with a very secure and immutable record of all transactions. The market value of USDC, the second-largest stablecoin, is about $25 billion.

• Conversely, a decrease in Bitcoin dominance could signal that investors are taking on riskier investments in altcoins.
• Investors can identify such periods by using the TradingView Bitcoin Dominance Index.
• This itself is not as straightforward as it seems; “Bitcoin market cap goes up, altcoin market cap goes down” and vice versa does not tell traders the whole story.
• Now, we can multiply the two variables and come to around $825 Billion, roughly equivalent to today’s BTC valuation.
• The rise of stablecoins, cryptocurrencies whose price attempts to maintain a stable value by being pegged to a stable asset like the US dollar, has put prolonged pressure on BTC dominance.
• Generally speaking, Bitcoin has maintained its dominance over the years, with its market capitalization accounting for more than 60% of the total market capitalization.
• For example, suppose the blockchain gains traction as a logistics and supply solution in the future.

Similarly, BTC dominance can be used to trade or predict cryptocurrency market extremes. When the BTC dominance ratio is very high, history shows that the coin’s price may fall. In contrast, low dominance suggests that the BTC price may experience an uptrend. Bitcoin dominance allows crypto traders to understand the trend of BTC and altcoins like Ethereum.

The existence of a thriving Bitcoin community, active development environment, and ongoing scalability and usability improvements have maintained Bitcoin’s position as a leading cryptocurrency. Bitcoin’s issuance rate is also reduced periodically through a process called “halving.” Approximately every four years, the number of new BTC generated and awarded to miners per block is cut in half. This halving event occurs after every 210,000 blocks are mined, effectively slowing down the rate at which new BTC enters circulation. In addition to block rewards, miners also earn transaction fees for including transactions in the blocks they mine. This provides an additional economic incentive for miners to prioritize transactions with higher fees, contributing to the overall network efficiency.. Memes are not only entertaining but also carry cultural significance, reflecting the values, beliefs, and attitudes of a particular group or community.

Until 2017, Bitcoin accounted for as much as 95% of the total crypto market cap, given the previous lack of serious competition from other cryptocurrencies. While the index started to be used in trading communities around 2017, it actually didn’t become popular until the altcoin boom of 2021. CoinMarketCap and TradingView arose as some of the early platforms to monitor Bitcoin dominance and popularize it as a way to observe market sentiment and trends. As an easy exercise, let’s assume that the Bitcoin market cap is $5 trillion and the total crypto market cap is $10 trillion.

In summary, by keeping an eye on Bitcoin’s market dominance and combining it with other essential metrics, investors and traders can increase their chances of success in crypto’s ever-changing landscape. Liquidity—the ease with which an item may be purchased or sold without impacting its price–is one big factor that influences Bitcoin Dominance. For example, if Bitcoin’s dominance at a point in time is 60%, it means that 60% of the current cryptocurrency market is due to  Bitcoin transactions. Because it shows how strongly investors believe Bitcoin is related to other cryptocurrencies, this metric is very helpful to traders and investors. As a result, the Bitcoin Dominance chart functions more like a powerful gauge of the market’s state and how Bitcoin influences it. The lowest dominance dropped below 35% in January 2018 during the ICO boom when money flooded into altcoins, and investors speculated on alternative blockchain projects besides Bitcoin.

The more altcoins there are, the less dominance BTC will enjoy due to the increased market share of these projects. Nonetheless, it still holds a strong position in the market and can still be used in identifying profitable trading positions. When the Bitcoin dominance increases in value, traders are treading cautiously. This implies they’re taking money from risky altcoins and putting it into a more stable asset like Bitcoin. This usually happens during downturns within the market as investors look to hedge their portfolios against decline.

Instead, we must analyze which market cap is winning terrain against the other. Thus, BTC dominance can be summarized as a tug-of-war between altcoins and Bitcoin. Typically this means that most of the other coins are going to suffer if Bitcoin is a large part of the total market cap.

• Miners are incentivized to maximize their revenue by selecting transactions with the highest fees and dedicating computational power to solve the hash puzzle efficiently.
• Four months later, however, BTCD stood at only 40% with liquidity moving to altcoins instead.
• Bitcoin’s dominance in the cryptocurrency market has its pros and cons, which are essential for both experienced investors and beginners to consider.
• Finally, when Bitcoin and its dominance are falling in unison, the entire crypto market is in a bear trend.
• Bitcoin dominance is an important metric for understanding the overall health of the cryptocurrency market.
• At any one time, a multitude of variables contribute to Bitcoin’s market dominance.
• However, Bitcoin, the largest crypto, still determines market cycles and psychology more than anything else in this ever-evolving crypto arena.
• However, there’s also the possibility that these altcoins might lose their appeal once the initial hype subsides.
• In bear markets, altcoins typically lose value faster than Bitcoin, while during the recovery, the opposite can be true.

Furthermore, FiCAS’s product, the 15 FiCAS Active Crypto ETP, is the first of its kind worldwide. Bitcoin dominance refers to the percentage of the total cryptocurrency market cap that Bitcoin represents at any given time. Bitcoin dominance is a metric used to gauge Bitcoin’s relative strength and influence within the broader cryptocurrency market. If all of the Bitcoin in circulation is worth $1tn, and all of the other coins combined are worth $1tn, then Bitcoin’s dominance would be 50%. When first conceived, Bitcoin was the first cryptocurrency to be created and had a substantial market share within all cryptocurrencies? The overall share of stablecoins, such as Tether, as well as Ethereum increasingly start to resemble that of Bitcoin, however.

Moreover, Bitcoin’s robustly secure PoW consensus mechanism and gamified mining structure incentivize user participation and competition among miners, ensuring the network’s security and integrity. The PoW mechanism, combined with Bitcoin’s decentralized nature, make the network resistant to malicious attacks and censorship. Adding further security, the decentralized nature of Bitcoin’s network, with thousands of independent nodes and miners distributed worldwide, makes it resistant to attacks and censorship.

Four months later, however, BTCD stood at only 40% with liquidity moving to altcoins instead. In straightforward terms, market capitalization pertains to the complete valuation of a particular asset currently in circulation. In the case of Bitcoin, determining its market capitalization involves the multiplication of the prevailing price by the total number of BTC that have been mined up to this point. The regulatory domain in which Bitcoin functions can also immensely influence its dominance. Generally, if regulatory bodies support Bitcoin, it can motivate more investors to enter the market, invest in the token, and increase its market cap, thereby allowing it to sustain its dominance.

This ratio is derived from Bitcoin’s relationship with the rest of the crypto market. It serves as a metric that may be used by crypto traders to get a pulse of the market, manage risks, and help spot What Is Bitcoin (BTC) Dominance? possible trends and trading opportunities, typically in conjunction with other datasets. BTC dominance is a ratio that compares Bitcoin’s market capitalisation with the entire crypto market cap.

Its importance in the cryptocurrency market is unparalleled, and one key metric that highlights this is BTC dominance. This article aims to demystify BTC dominance, exploring its concept, importance, calculation, and impact on the crypto market. Conversely, when Bitcoin’s dominance decreases, it indicates a shift in market sentiment towards alternative cryptocurrencies, which can introduce greater uncertainty and volatility. When Bitcoin dominance is strong, it implies that Bitcoin has a larger market cap than other cryptocurrencies, pointing to a market mood is looking for safety.

Having a good understanding of these major factors will help you make informed crypto investment decisions. Bitcoin dominance is a very useful indicator that can be used to understand the general health of the crypto market. Also, it can provide you with good insights into the present state of the market. The market capitalization of Bitcoin as a percentage of the total market value of cryptocurrencies is expressed by the Bitcoin Dominance metric. When Bitcoin dominance rises, it often signals a preference for the relative safety of Bitcoin over the potentially higher risk and reward of altcoins.

A point of distinction between Real Bitcoin Dominance and Bitcoin dominance is that Real Bitcoin Dominance excludes ICOs and stablecoins, given their association with centralized intermediaries. This guide explains what Bitcoin dominance is, how to calculate it, the factors that influence it, and other related details. As a result, you should often invest in Bitcoin (or cash) when Bitcoin Dominance is rising and in alternative assets (such as ETH, large caps, mid caps, low caps, etc.) when Bitcoin Dominance is falling. Stay up to date with our latest exchange reviews, promotions, how-to guides and educational articles on Bitcoin, cryptocurrency & more. On the other hand, when Bitcoin dominance hits its previous highs, they are known as resistance levels and can indicate an incoming downtrend.