There are four possible outcomes when considering the relationship between BTC price and dominance metric. The BTC dominance ratio can change due to numerous variables and circumstances unravelling within and outside of the crypto market. Through numerous challenges, Bitcoin has always managed to maintain a relatively strong and healthy market capitalisation, while other altcoins entered and exited the market due to various complications. To further visualise this concept, let’s swiftly calculate Bitcoin’s market cap by utilising the circulating supply and Bitcoin’s price. At the moment of writing, BTC’s price currently sits at approximately $42,000.

How Bitcoin Dominance Influences Crypto Investment Strategies

So, when Bitcoin dominance falls to these historic support levels, there’s a chance it will rebound and start trending upward. Cryptocurrencies have been used in transactions that involve narcotics, guns, or illegal goods. Bitcoin was used as the preferred payment method on the darknet black market Silk Road. It was developed by an anonymous person (or people) known by the pseudonym Satoshi Nakamoto and launched in 2009. Bitcoin was the first blockchain-based development, and its functionality is based on the whitepaper published prior to its launch. As the frontrunner, Bitcoin sets the precedent, and its overarching influence shapes the direction, innovations, and trends in the crypto sphere.

• Bitcoin has a relatively stable status and functions as the preeminent crypto asset.
• Sustained drops in Bitcoin dominance indicate strong speculative interest and funds flowing out of Bitcoin into higher-risk, higher-return altcoin bets based on market euphoria during such altcoin runs.
• At present, there are thousands of cryptocurrencies in existence, with a total market cap of over $2 trillion.
• The most vital aspect of Bitcoin Dominance is that it enables you to determine whether alternative currencies are experiencing an uptrend or a downturn relative to BTC.
• At the time of writing, it stands at 43.43%, having halved in roughly five years.
• 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.
• However, like all market indicators, it is not infallible and should be used in conjunction with other market data and trends.

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Consequently, the overall impact of favorable market conditions on Bitcoin dominance remains highly contingent on the prevailing circumstances. Bitcoin dominance is only a metric that crypto traders and investors can use to manage exposure to risk. You can also use it to evaluate promising projects and make informed trading decisions. Some people think that Bitcoin dominance was only relevant in the past because only a few cryptocurrencies were in existence by then. They argue that Bitcoin will have less impact on the general crypto market in time.

What Is Bitcoin (BTC) Dominance? Understanding the Power of Bitcoin in the Crypto Market

However, despite the thousands of altcoins on the market, Bitcoin’s dominance is yet to be topped. It can help them grasp the current market situation and adjust their financial goals accordingly. However, BTC dominance has the same disadvantages as any other trading strategy or tool.

Historical Performance of Bitcoin Dominance

Bitcoin is the world’s leading cryptocurrency, accounting for over 60% of the total market capitalization. This is largely due to its strong network effect and liquidity, making it the most popular digital asset for investors and traders. Bitcoin dominance is a measure of Bitcoin’s market share compared to the entire crypto market. When Bitcoin’s dominance increases, it indicates that investors may be moving their funds into Bitcoin as a safer investment compared to other cryptocurrencies. Conversely, a decrease in Bitcoin dominance could signal that investors are taking on riskier investments in altcoins. It can be a viable tool to identify the market trend since it reflects BTC’s strength relative to the broader market.

Relation of BTC Dominance With Market Capitalization

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 trade crypto using BTC dominance

These changes reflect the evolving landscape of the cryptocurrency market and investor responses to these developments. At present, there are thousands of cryptocurrencies in existence, with a total market cap of over $2 trillion. As market demand rises and investors move to acquire cryptocurrency, Bitcoin’s price rises and usually most other cryptocurrencies will follow Bitcoin’s lead. There has therefore usually been a positive correlation between BTC and the overall market cap of the crypto market.

Xapo’s Interest-Bearing Bitcoin Accounts: How Does it Work? Is it Feasible in the Long Term?

Accounting for a very large portion of crypto’s total value, Bitcoin’s price action has great influence on the rest of the market. This ICO mania did not last long, however, as Bitcoin’s price temporarily reached a new all-time high at the end of December 2017 before crashing in the subsequent months. The decreasing confidence and increasing negative sentiment experienced by the overall market ultimately led to the 2018 cryptocurrency crash and the ensuing bear market, which lasted about a year. Aside from new altcoins, the crypto market has experienced many disruptions due to the solid technological basis of blockchain. NFTs, smart contract functionality, DAOs and stablecoin concepts are among the most famous examples of brand-new technologies bursting onto the scene and accumulating a massive market capitalisation.

Where to check the BTC dominance chart?

As the performance of Bitcoin is frequently used as a gauge for the health of the entire cryptocurrency market, it can affect the mood of the market as a whole. Over the years, a lot more resources and capital have been poured into the cryptocurrency and blockchain sector. This has resulted in projects like Ethereum delivering technological innovations and achieving substantial valuations. The year 2017 was especially important, as the rise of “altcoins” resulted in BTC dominance taking a big fall.

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• There is no strict formula for understanding the relationship between the Bitcoin market cap and altcoin market cap — the two are in constant flux.
• Actively trading Bitcoin dominance levels offers adept crypto investors another tool to strategically maneuver market cycles.
• It’s essential to keep in mind that BTC dominance doesn’t offer a definitive guarantee of Bitcoin’s or any other cryptocurrency’s performance.
• Given that altcoins generally exhibit superior performance during an altcoin season, bitcoin often witnesses a weakening of its dominance during this phase of the market cycle.

It can help them identify potential investment opportunities and develop effective trading strategies. However, like all investment strategies, it’s important to consider other market indicators and factors, and not rely solely on Bitcoin dominance. BTCD can be used to manage risk exposure to the cryptocurrency market, as it can indicate a potential bear market for altcoins. If BTC’s value decreases but BTCD increases, investors may consider selling their altcoin positions and moving into Bitcoin. Traders can also use BTC dominance to understand which cryptos have the most potential, as more capital flows into altcoins can dilute Bitcoin’s market cap, potentially causing BTC dominance to fall.

Is BTC Dominance a Reliable Indicator in Crypto Trading?

Real BTC Dominance is a term used to describe a measure of Bitcoin’s market cap compared to the combined market cap of proof-of-work cryptocurrencies like Litecoin, Dogecoin, and Bitcoin Cash. This method provides a narrower comparison of Bitcoin’s performance to similar cryptocurrencies. Besides being an indicator, the Bitcoin dominance index is also tradable on major cryptocurrency exchanges.

How to Calculate BTCD

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.

During periods of high market volatility, investors often move their funds into stablecoins, which have their values pegged to real-world assets. This way, when the BTC Dominance increases, it signals that investors are playing safe and hedging against riskier assets. When the BTC Dominance drops, it could suggest that investors are taking on riskier assets in hopes of higher profits. This helps traders get a snapshot of the overall market sentiment at a glance. The tool helps investors determine the market trend between Bitcoin and altcoins or other proof-of-work coins.

• Ethereum was instead designed to be an open-ended decentralization platform that other cryptocurrency projects could take advantage of.
• He started Hedge With Crypto to publish informative guides about Bitcoin and share his experiences with using a variety of crypto exchanges around the world.
• In most cases, a steep and consistent downtrend in dominance happens in crypto bull markets, because intense bull markets tend to propel alt capitalizations higher than Bitcoin.
• In addition, the crypto market is still witnessing the launch of several more altcoin projects.
• When Bitcoin dominance rises, it often signals a preference for the relative safety of Bitcoin, while a decline in dominance can indicate growing interest and confidence in altcoins.
• Understanding the total crypto market cap is pivotal when analyzing Bitcoin dominance.
• 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”.

How to read the Bitcoin Dominance Index?

In crypto bull markets, a steep and steady decline in dominance typically occurs due to the tendency of ferocious bull markets to drive alt capitalizations higher than Bitcoin. Similarly, a reversal of this pattern is frequently indicative of a bear market. The content published on this website is not aimed to give any kind of financial, investment, trading, or any other form of advice. BitDegree.org does not endorse or suggest you to buy, sell or hold any kind of cryptocurrency.

BTC.D chart

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.

• A measure that represents the market capitalization of Bitcoin as a percentage of the total market value of cryptocurrencies.
• The long-term strategy can be profitable if the value of Bitcoin continues to increase over time.
• Conversely, when Bitcoin dominance is low, it means that altcoins are gaining traction and capturing a larger share of the market cap.
• Therefore, when evaluating rotations and seeking trade signals, it’s crucial to combine this metric with on-chain, technical, sentiment, and qualitative factors.
• One of the main reasons for BTC’s dominance is its market cap, which is the value of all Bitcoin tokens in the asset’s circulating supply combined.
• The dominance of Bitcoin’s PoW consensus mechanism lies within its decentralization and security.
• However, one coin has remained on the cryptocurrency ladder through all the trials and tribulations.

Practical Applications of BTC Dominance Charts

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.

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.

The market cap of these smaller altcoins remains but a small fraction of the market cap that Bitcoin enjoys. The market capitalization of Bitcoin as a percentage of the overall market cap of all cryptocurrencies is referred to as its dominance. It measures the importance and effect of Bitcoin on the cryptocurrency market. Bitcoin (BTC) dominance refers to the digital gold’s influence over crypto markets and how it is the most established, best-known, and most commonly traded cryptocurrency today. In this article, we will explore the concept of BTC dominance and the factors contributing to its lasting impact. The primary factors that affect BTCD are the Bitcoin market cap and the global crypto market cap.

For instance, say Bitcoin’s market cap is $1 trillion, and the total cryptocurrency market cap is $3 trillion. Bitcoin’s dominance would be 33.33% because Bitcoin accounts for a third of the entire crypto market’s value. Grasping the nuances of Bitcoin dominance is not just about understanding its market share but also about recognizing its role as a bellwether for the cryptocurrency market’s directional trends. It serves as a guide for investors looking to navigate the cyclical ebbs and flows of investor confidence between Bitcoin and its contenders.

It functions in almost exactly the same way and uses the same proof-of-work consensus mechanism. For many years, Bitcoin’s value was significantly greater than that of all other cryptocurrencies put together — sometimes by as much as 100%. In other words, if you added together the market value of every single cryptocurrency in existence (except Bitcoin), Bitcoin would be worth twice as much. Rafayel Begoyan is a marketing specialist, AI enthusiast, and crypto enthusiast with a passion for leveraging cutting-edge technology to drive business growth. He has been fascinated by the potential of blockchain and cryptocurrencies to revolutionize traditional finance and is continuously exploring new ways to incorporate them into marketing initiatives.

The BTCDOM Index provides insights into the market and can be used as a tool to speculate on Bitcoin’s relative strength against other cryptocurrencies. It is a very useful indicator, but just like any other – it does not work alone. It’s not infallible, so it’s worth pairing it with other tools that will give you an even greater view of the cryptocurrency market. So if altcoin dominance is growing, funds are flowing toward altcoins rather than other crypto. However, if altcoin dominance goes down, then investors’ money moves from altcoin to Bitcoin. In today’s lesson, as you have noticed, we were closely comparing BTC.D (Bitcoin Dominance) to altcoins.

When BTC Dominance increases, altcoins generally depreciate in value relative to BTC.When BTC Dominance declines, alts as a whole appreciate in value relative to BTC. Kevin started in the cryptocurrency space in 2016 and began investing in Bitcoin before exclusively trading digital currencies on various brokers, exchanges and trading platforms. He started Hedge With Crypto to publish informative guides about Bitcoin and share his experiences with using a variety of crypto exchanges around the world. Bitcoin dominance provides a bird’s eye view of the cryptocurrency landscape. While Bitcoin remains a formidable force, the ebb and flow of its dominance remind us of the dynamic and ever-evolving nature of the crypto world. The Bitcoin Dominance Index is a ratio of the Bitcoin market cap compared to the whole cryptocurrencies 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. Larger and more complex transactions usually have higher transaction fees because they require more time and computational energy to validate. BTC became synonymous with the online marketplace “The Silk Road”, where its https://crypto.com/university/what-is-bitcoin-dominance anonymity and convenience made it a preferred medium of exchange. The Silk Road was an infamous online marketplace operating on the dark web from 2011 to 2013. It was primarily known for facilitating the buying and selling of illicit goods and services. The purpose of this website is solely to display information regarding the products and services available on the Crypto.com App.

For example, Bitcoin’s dominance was at a particularly low point in June 2022 – approximately 41%. Based on historical data, this might suggest an altcoin surge and a bull market. On the other hand, in bear markets, BTC dominance typically rises because investors strive to mitigate risk. Most crypto investors are not comfortable keeping volatile altcoins and shift to relatively less volatile digital assets like Bitcoin. The Bitcoin Dominance Index is a ratio of the bitcoin market cap compared to the whole cryptocurrency market cap.

BTC dominance will last as long as Bitcoin remains the most valuable digital currency. On the other hand, decreasing Bitcoin dominance is often due to a spike in altcoin interest. This occurs when the buying power for cryptocurrency is at its highest, and the market is quite bullish. BitDegree aims to uncover, simplify & share Web3 & cryptocurrency education with the masses. Join millions, easily discover and understand cryptocurrencies, price charts, top crypto exchanges & wallets in one place. In comparison, by 2017, it had reduced to 85.4%, while its main market competitor ETH had a 5.7% at the time.

Historically, the direction of the overall crypto market cap has followed Bitcoin’s market cap. This is primarily due to Bitcoin’s position as the leading cryptocurrency in the cryptocurrency market. While BTC is one of the most popular cryptocurrencies, its price volatility means investors move their funds from the asset during downturns. Stablecoins like Tether (USDT) have their values pegged to real-world assets like the USD, gold, and other assets. Because of this, assets like Tether, USD Coin (USDC), and Binance USD (BUSD) have grown in popularity.

When capital moves out of the BTC market into stablecoins, it can lead to a reduction in BTC dominance. Bitcoin (BTC) refers specifically to the cryptocurrency and its market price, while Bitcoin dominance measures BTC’s market capitalization as a percentage of the total crypto market cap. Bitcoin market dominance is an important instrument for interpreting and foreseeing fluctuations in the crypto market. Actively trading Bitcoin dominance levels offers adept crypto investors another tool to strategically maneuver market cycles. Bitcoin dominance is the ratio between Bitcoin’s market cap and the total capitalisation of the entire cryptocurrency market. The ratio measures BTC coins’ value relative to other cryptocurrencies, which helps investors make financing decisions.

At the time of writing, it stands at 43.43%, having halved in roughly five years. BTC dominance has fallen below 40% for the second time since then, and stands at an eight-month low. This is in contrast to the previous crypto winter in 2018, when BTC dominance stood strong at 70% as all altcoins including Ethereum collapsed.

These same critics often discuss the shortcomings of market capitalization metrics, which is commonly calculated by multiplying the token value by the number of tokens in circulation. This is where their quarrel with the metric lies, as many BTC have been lost in forgotten wallets, or sits abandoned elsewhere. Contrary to Bitcoin’s market cap, the total altcoin market cap is a little trickier to calculate.

This index influences market liquidity and volatility and is an essential strategic investment planning and trading tool. In addition, a decline in Bitcoin’s dominance may signal the beginning of the alt season, when interest in other coins increases and opportunities for high returns in this market segment increase. Bitcoin dominance is a crucial metric for crypto traders as it offers insights into the market’s overall mood and potential trends. It’s calculated by dividing Bitcoin’s market cap by the total crypto market cap. This metric helps traders understand Bitcoin’s influence over the market and its correlation with altcoins. A change in Bitcoin dominance can indicate shifts in market dynamics, making it a valuable tool for risk management and spotting trading opportunities.