This metric serves as a key indicator of Bitcoin’s influence over the rest of the crypto market and can significantly impact trading strategies. Bitcoin’s (BTC) dominance is the proportion, expressed as a percentage, of Bitcoin’s market capitalization to the total market capitalization of all cryptocurrencies. Bitcoin dominance is a fundamental concept that helps investors and traders understand what is happening in the crypto market on a macro scale. For example, Bitcoin’s dominance may point to crypto market trends and investment opportunities to buy Bitcoin or an altcoin.

How to Use BTC Dominance in Trading

However, there have been certain periods where its dominance had decreased, such as during the 2017 bull run when the market capitalization of altcoins increased significantly. Additionally, with more and more altcoins entering the market, BTC dominance can be expected to keep falling. As the altcoin ecosystem keeps expanding, it’s difficult to say how helpful Bitcoin dominance will be as an indicator for the wider market in the future. The increase or decrease of BTC dominance is not necessarily a good or bad thing; it serves as a tool that may give traders some perspective of how the crypto space is evolving.

What is Bitcoin (BTC) Dominance?

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.

BTC Price Goes Down, Dominance Goes Down

It measures the coin’s market cap relative to the overall crypto market — effectively showing how strong Bitcoin compared to all the other cryptocurrencies that are not BTC, called “altcoins”. Why dominance matters is because market caps of any crypto can change relatively quickly, either due to sudden price changes or a change of recorded trading volume. Bitcoin dominance is the ratio between the market capitalization of Bitcoin to the total market cap of the entire cryptocurrency market. It gives a sense of Bitcoin’s value relative to other cryptocurrencies, and is frequently used by investors and traders to try to help them make better investment decisions. Bitcoin dominance, often referred to as BTC dominance, represents the market capitalization ratio of bitcoin compared to the aggregate market capitalization of all other cryptocurrencies. This metric holds significance in the crypto space as it provides valuable insights into the relative strength and influence of bitcoin within the larger cryptocurrency market.

Historical view of Bitcoin dominance

However, one coin has remained on the cryptocurrency ladder through all the trials and tribulations. Bitcoin is as dominant as ever within the crypto ecosystem in 2024, offering traders the most stable investment opportunity. Over the years, we have seen that whether Bitcoin’s price goes up or down, the rest of the crypto market follows it. So if you want to track the movement of Bitcoin and the entire digital asset market, use the indicator discussed today to do so.

How does this index determine the fear and greed level of the market?

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.

Advantages and Disadvantages of Bitcoin Dominance

In such scenarios, if funds are redirected from these altcoins to BTC or even withdrawn from the crypto market altogether, BTC dominance may experience a resurgence. Stablecoins provide a convenient gateway to access a diverse array of cryptocurrencies, particularly when compared to using fiat currency. This is because fiat-to-crypto exchanges, often referred to as gateway exchanges, can be somewhat restrictive, primarily offering the more popular cryptocurrencies and stablecoins. Conversely, crypto-to-crypto exchanges frequently present a more extensive range of tradable cryptocurrencies, typically paired with select stablecoins. As a result, individuals looking to engage in specific cryptocurrency trades may choose to enter the market through stablecoins.

What Happens When BTC Dominance Drops?

Perform activities like crypto exchange, creating virtual dollar or crypto cards for online payment. DApps can be used on the Bitcoin blockchain, particularly after updates like Taproot and SegWit. However, there are still restrictions on its usage because the blockchain was not developed from scratch to resolve these restrictions. Lots of cryptocurrencies are worth buying and investing in, depending on what your objectives are. In the early days of Bitcoin, mining was a much simpler, less intensive task, which made it very popular.

What Is Bitcoin Dominance (BTC.D) And How To Use It For Crypto Trading?

This metric helps investors assess the overall position of bitcoin within the broader cryptocurrency market, facilitating strategic adjustments to capitalize on prevailing market trends. Bitcoin dominance is a very important metric that both crypto investors and traders can use to understand the all-around health of the crypto market. As the #1 crypto by market cap, BTC’s price action significantly affects the rest of the market. Monitoring this metric helps traders and investors understand Bitcoin’s value in relation to the altcoin market and make wise investment decisions. Bitcoin dominance refers to the measure of Bitcoin’s value in comparison to the total market capitalization of all other cryptocurrencies combined. It’s a commonly used metric in the cryptocurrency market to gauge Bitcoin’s market share relative to the entire crypto market.

What is real BTC dominance?

You should consider whether you understand how leveraged products work and whether you can afford to take the inherently high risk of losing your money. It’s crucial to remember that the bitcoin market is dynamic and ever-changing. Market dynamics can be impacted by the emergence of new technology, changes in regulations, and https://crypto.com/university/what-is-bitcoin-dominance the emergence of creative ventures and use cases. Additionally, Bitcoin is positioned as a digital asset with perceived scarcity and possible value growth over time due to its limited supply and deflationary monetary policy. Other technical analysis metrics are calculated based on different aspects of price and volume data.

Why It’s Important to Track Bitcoin Dominance

Total market capitalization refers to the total market value of all cryptocurrencies. An asset’s market cap is determined by multiplying the asset’s total supply by its current price. Bitcoin dominance, also known as the Bitcoin ratio or index, is a key metric in the crypto landscape. It defines the percentage of the total cryptocurrency market capitalization contributed by Bitcoin.

Factors impacting the Bitcoin dominance

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.

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.

Relation of BTC Dominance With Market Capitalization

• The adoption of new altcoins could increase the market cap, while fewer adoptions would decrease it.
• In February 2017, Bitcoin dominance (BTCD) was at 85.4%, with Ethereum (ETH) taking 5.7% of the market share and Ripple (XRP) taking the other 1.1%.
• However, fluctuation in this metric does not necessarily correlate with its intrinsic value, nor does it imply a rapid capital inflow.
• One of them is that it is starting to show unprecedented behaviour, arguably slowly losing its role as a sentiment gauge.
• Having a good understanding of these major factors will help you make informed crypto investment decisions.
• Besides being an indicator, the Bitcoin dominance index is also tradable on major cryptocurrency exchanges.
• So, it is essential to understand the BTC dominance in the broader context instead of the narrow scope.

Bitcoin Dominance is a measure of how much of the total market cap of crypto is comprised of Bitcoin. Looking at the ratio of Bitcoin dominance to altcoin dominance, traders can see which market cap share is increasing or decreasing more quickly to inform buy and sell decisions. The relevant chart appeared after the ICO boom in 2017, but the index has only recently gained popularity in 2021. BTC.D is a symbol used on various cryptocurrency market platforms, like TradingView, to represent Bitcoin dominance. It’s a chart that tracks the changes in Bitcoin’s market dominance over time. Because the number of Bitcoins in existence grows slowly, BTC market cap is mostly influenced by its price action.

• In 2023, with such a high market share, there is no doubt that Bitcoin’s position remains a key consideration for traders and investors.
• 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.
• While smart contracts have become a staple of the industry and the backbone of the market’s second most valuable coin, Ethereum, NFTs have become almost extinct in their original form.
• The Bitcoin dominance definition is interconnected with the term “market cap”, which refers to the value calculated by multiplying the current coin price by its circulating supply.

In other words, it reflects the relative size and influence of Bitcoin on the crypto market. When compared to Bitcoin fluctuations, it can help assess market sentiment and potential shifts in investment flows. Bitcoin dominance is simply the ratio between Bitcoin’s market capitalization to the global market capitalization of the whole cryptocurrency market. It is the exact percentage of the whole crypto market cap value held by Bitcoin.

• At the current rate, Bitcoin’s market cap is over $1 trillion, with a market cap of approximately 19.6 million BTCs.
• Contrary to Bitcoin’s market cap, the total altcoin market cap is a little trickier to calculate.
• Over the years, a lot more resources and capital have been poured into the cryptocurrency and blockchain sector.
• Nevertheless, its dominance had witnessed a considerable decrease during certain periods, such as during the bull run in 2017, when the total market capitalization of altcoins significantly increased.
• During these times, altcoin prices can find it difficult to acquire traction, and traders might decide to concentrate more of their portfolios on Bitcoin.
• In that case, traders might start piling assets into crypto from this sector instead of BTC.

If BTC.D goes up, then Bitcoin has more total capitalization, and altcoins have less at the same time. Bitcoin dominance is a signal for traders to make changes in their investment strategies; no wonder, then, that BTC.D is such an important indicator. Bitcoin dominance is one of the most important and very useful indicators that show us the movement of Bitcoin on a chart. In today’s lesson, we will discuss what exactly this Bitcoin dominance is and why it is so crucial, especially within technical analysis. Learn about ERC-404, the experimental token standard that is helping to add key features to Ethereum digital assets that improve liquidity and fungibility. Tether, the largest stablecoin, has a market cap of about $110 billion, up from $4.1 billion at the start of 2020.

How to sell Bitcoin (BTC)

Bitcoin has a very strong network influence, which means that more investors are as likely to join the network as more investors use it. Investors can also decide to switch and invest in altcoins when they realize that Bitcoin’s dominance is decreasing compared to the value of altcoins. All of these things, plus a lot more, have helped Bitcoin attract the largest user base of any cryptocurrency. However, it could also go the other way; investors may choose to diversify into other assets if economic conditions improve or there is more trust in conventional markets.

The Bitcoin Dominance Chart is a valuable tool that provides insights into the market’s behaviour, helping investors and traders make informed decisions. Anything can happen in crypto, and it is traders’ task to take into account as many tried-and-tested methods as possible to inform their strategies and minimize risk. Nonetheless, there is a place for market cap dominance in Bitcoin and altcoin trading, even as the number of altcoins trends higher and higher. Changes in Bitcoin dominance can have a significant impact on the volatility of the overall crypto market. Bitcoin dominance refers to the ratio of Bitcoin’s market capitalization to the total market capitalization of cryptocurrencies. Bitcoin’s dominance in the cryptocurrency market is multifaceted, with various factors contributing to its enduring influence.

Bitcoin’s price started rising rapidly again in 2021, where its market cap spiked to an unprecedented rate of 700% since March 2020, surpassing its previous all-time high by a significant amount. BTC dominance is a simple ratio that is useful to practically everyone in the crypto market. It can be analysed quickly and will reliably showcase if the market is experiencing any sort of change. It is easy to see why expert traders frequently employ BTC dominance since it is a clear signal for market changes. While this ratio is simple, it is very effective in the hands of adept investors, allowing them to adapt to changing market environments quickly.

• Bitcoin is the most secure and most reliable cryptocurrency, with its blockchain equipped with a very secure and immutable record of all transactions.
• In today’s lesson, as you have noticed, we were closely comparing BTC.D (Bitcoin Dominance) to altcoins.
• As can be seen from the screengrab below, it provides a good snapshot of how Bitcoin dominance has evolved in the past 5 years.
• In the world of cryptocurrencies, understanding market dynamics is key to successful investing and trading.
• The Bitcoin protocol dynamically adjusts the difficulty of the hash puzzle to maintain a consistent block creation rate of approximately one block every 10 minutes.
• In the past, bull markets have indicated falling Bitcoin dominance as investors search for high-yielding altcoins.
• Bitcoin’s price briefly reached an all-time high in December 2017 but remained low due to decreasing confidence and negative sentiment.

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.

When altcoins like Litecoin first emerged around 2011, Bitcoin dominance held above 90%. The biggest shakeup came during the ICO boom around 2017, when Ethereum and ERC-20 tokens proliferated. The Bitcoin ratio bottomed under 35% on January 14, 2018, its lowest point ever.

Bitcoin’s PoW consensus mechanism functions by requiring network participants, known as miners, to solve complex mathematical puzzles to validate and add new transactions to the blockchain. A consensus mechanism is a protocol or set of rules used in blockchain networks, to achieve agreement among participants on the validity of transactions and the state of the network. It ensures that all participants have a consistent view of the shared ledger and prevents double-spending or fraud. Memes served as a unifying force within the Bitcoin community, fostering a sense of camaraderie and shared identity among enthusiasts. By participating in meme culture, Bitcoin supporters felt a sense of belonging and solidarity, strengthening their commitment to the cryptocurrency. Open interest (OI) is the total value of outstanding derivative crypto contracts that have not been settled yet.

In the ever-changing landscape of cryptocurrencies, understanding and keeping an eye on BTC dominance can provide valuable insights and help investors navigate the market more effectively. As with all investment strategies, it’s important to consider a range of factors and metrics, and not rely solely on BTC dominance. Founder Dr. Ali Mizani Oskui is among the world’s first financial engineers to gain a thorough understanding of this new asset class and its market. Since 2015, he has actively managed several cryptocurrency portfolios, including one of the most successful known crypto portfolios globally.

In this BTC dominance chart, we can see that Bitcoin had roughly 99% of the crypto market cap share when it was first launched in 2009. The crypto landscape was smaller, and there were not a lot of other cryptocurrencies back then. Four years later, Bitcoin had a dominance of 94%, as there were only a handful of altcoins that competed with it in the market. Even when Ethereum entered the space in 2015, Bitcoin dominance was still at around 90%. The recent regulatory trends are also significant factors, changing the entire makeup of the crypto ecosystem by introducing stricter KYC and anti-money laundering laws.

To calculate Bitcoin’s market cap, you need to take all the Bitcoin in circulation and multiply that by the latest BTC price. As of February 2024, the total Bitcoins in existence are around 19,636,106, while the price of BTC as of February 25th is around $51,581. The TabTrader Academy is meanwhile here to help navigate the complex world of crypto trading.

In simpler terms, it’s a measure of Bitcoin’s market capitalization as a percentage of the total cryptocurrency market cap. Bitcoin dominance steadily declined in April 2024 to below 50 percent, amid rumors of central banks halting or potentially lowering interest rates in the future. Within the crypto world, this so-called “dominance” ratio is one of the oldest and most investigated metrics available.