All You Need To Know About Bitcoin Dominance

If you ever caught yourself wondering what is BTC dominance, this article will briefly explain all the essential points: how to calculate this metric and why it is relevant for investors.

What is Bitcoin dominance?

Bitcoin dominance (also known as the Bitcoin dominance index or the Bitcoin dominance ratio) measures how much of all cryptocurrencies are accounted for by BTC. Simply put, Bitcoin dominance is determined by calculating what percentage of the total crypto market capitalization BTC holds. 

When Bitcoin was the only cryptocurrency on the market, its dominance was 100%. Therefore, when new coins were released, they did not instantly threaten its impressive power. However, after years of strongly dominating with a hold of over 95%, the percentages slowly decreased in 2017, hitting an all-time low of 37.64% in January 2018. Since then, it's been steadily fluctuating just above the 40% point, representing a market cap of approximately $365 billion. 

Is Bitcoin dominance a good thing?

Measuring Bitcoin dominance is a beneficial way to keep an eye on the cryptocurrency market since BTC moves faster than other coins and remains the niche's main component. That is precisely why this metric exists: to give us clues about the market's stability at that time and to analyze different conditions that determine market trends of Bitcoin and altcoins.

However, the index is a bit more nuanced. Bitcoin dominating the market does not always predict that perfect times are coming. It can merely give us more information about the changing markets and hints to adjust our strategies, and it doesn't guarantee that Bitcoin and other altcoins will move as predicted.

Additionally, more crypto coins are being created constantly, and the Bitcoin dominance ratio might become irrelevant as they gain market share. Even so, the measure still provides excellent insight into market trends and trading opportunities until then.

How to take advantage of Bitcoin’s dominance?

In most bullish crypto markets, alternative cryptocurrencies tend to outperform Bitcoin. Likewise, a pullback of this trend is typically a sign of a bear market. It's important to note that Bitcoin dominance does not necessarily change when the market is bullish or bearish. Rather than being an absolute metric, BTC dominance is a ratio. 

To simplify it, some experts abide by these four interpretations: 

• If the dominance and price of Bitcoin are ascending, it can mean a potential Bitcoin bull market. 

• If the price of Bitcoin increases but the dominance is descending, it can mean a potential altcoin bull market. 

• If the price of Bitcoin decreases but the dominance ascends, it can mean a potential altcoin bear market.

• If the dominance and price of Bitcoin are descending, it can mean a possible bear trend for the entire crypto market.

Please remember that while Bitcoin dominance is an essential metric to look out for in the technical market analysis, it is simply a tool to predict upcoming trends. Therefore, conduct your research and make educated decisions. 

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