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.

What does the increase in stablecoin popularity mean for BTC dominance?

Therefore, investors need to monitor Bitcoin dominance to gain insights into the current state of the market. A rise in dominance might indicate a preference for the relative safety of Bitcoin, signaling cautious market sentiment. Conversely, a decline suggests a shift towards altcoins, often seen in more speculative or bullish market conditions. Arguably the most influential factor affecting Bitcoin’s dominance is the market’s volatility. This means the total market cap, including Bitcoin, experiences drastic changes.

More terms

• At one point, Bitcoin commanded close to 100% share of the cryptocurrency market.
• It is calculated by dividing the market capitalization of Bitcoin by the total market capitalization of all cryptocurrencies.
• How efficiently and securely a blockchain’s consensus mechanism is capable of validating and sequencing transactions determines how influential it can be in the border crypto landscape.
• The more secure and stable Bitcoin’s network, the higher its dominance, as people place trust in it over newer, untested currencies.
• Since Bitcoin often dictates the rest of the marketplace, BTC dominance becomes a necessary metric to measure its impact at any time.
• Let’s say that after performing a similar multiplication or using a dedicated calculator you find out that the total crypto market cap equals $874,325,259,553.
• In a bull market, altcoin popularity rises, leading investors to turn to altcoins, NFT projects, and riskier assets for big returns.
• 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.

There are reasons to incorporate the metric in your analysis, and reasons not to. Their argument is that the true market capitalisation of Bitcoin (and alts) may therefore be much lower. An investment strategy focusing on capital growth by dynamically managing a diverse cryptocurrency portfolio.

Market Sentiment:

Short-term traders benefit from Bitcoin’s short-term price trends by simply trading on their price changes. This kind of trading can be a very profitable strategy if you can accurately predict the short-term price movements of Bitcoin. Hence, as a crypto trader or investor, you need to observe Bitcoin’s dominance to understand the current state of the market. For instance, Litecoin, a popular altcoin with a current market value of almost $4 billion, was created from a copy of Bitcoin’s source code.

How to calculate Bitcoin dominance

In simple terms, BTC dominance or Bitcoin dominance is the ratio of Bitcoin’s market capitalisation to the global market cap of cryptocurrencies. But for those new to the crypto space, what exactly does this mean, and how is it used? Bitcoin’s dominance in the cryptocurrency market has its pros and cons, which are essential for both experienced investors and beginners to consider. By analyzing the BTC chart, you can see how changes in the market capitalization of Bitcoin and altcoins have affected its position in different historical periods.

Conclusion: Why is Bitcoin Dominance Important?

In that case, investors who are heavily invested in altcoins may consider selling some of their positions and moving into Bitcoin. Cryptocurrency traders use the Bitcoin dominance chart to get a pulse on the crypto market. BTC dominance is commonly used to identify the altcoin season – periods when altcoins outperform Bitcoin.

The Most Popular Cryptocurrency: BTC Dominance Explained

• Bitcoin (BTC), the first and most influential cryptocurrency, has been a game-changer in the financial world.
• Bitcoin may lose prominence if new blockchain technology, consensus methods, or cutting-edge altcoin features are introduced.
• Bitcoin dominance represents the ratio between the market capitalization of Bitcoin and the market capitalization of all other cryptocurrencies.
• Bitcoin was used as the preferred payment method on the darknet black market Silk Road.
• However, June 2022 represented the lowest overall crypto market cap in more than 12 months.
• Following not only the Bitcoin dominance chart and the overall crypto market cap, but also other risk assets in other uncorrelated markets can give you a handle on sentitment as well.
• Before this time, Bitcoin was the only primary digital currency, so it enjoyed the entire market share.

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.

Conclusion: The Dynamic Nature of Bitcoin Dominance

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

You can use platforms like CoinMarketCap or TradingView to check Bitcoin’s dominance graph. These sites offer detailed charts and analytical data on the market cap BTC dominance share compared to other cryptocurrencies. A graph can help you analyze historical trends and understand how Bitcoin’s market share has changed in response to various market events and news. Some of these platforms also offer technical analysis tools that can be useful to understand market trends better. When bitcoin dominance is high, it suggests that bitcoin has a relatively stronger market position and may indicate a more bullish sentiment towards bitcoin compared to other cryptocurrencies. In such scenarios, investors might consider adjusting their portfolio allocations to allocate a higher proportion towards bitcoin.

On-Ramping Via Stablecoins

Market dominance, and especially Bitcoin dominance, is a great indicator for crypto investors to choose where to allocate their funds, as well as when to invest and when to sell. However, and we cannot emphasize this enough–BTCD cannot be used in isolation. 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. Consequently, individuals actively trading both bitcoin and altcoins may opt to closely monitor bitcoin dominance to make necessary adjustments to their investment portfolios. Before the advent of altcoins, it was a common occurrence to witness bitcoin’s dominance persisting above the 90% mark.

Bitcoin ratio levels also shift based on the rise and fall of altcoins within the overall crypto market cap. As Bitcoin’s price and circulating supply shift relative to other cryptos, its slice of the overall market cap pie grows or shrinks over time. Traders can use these percentage shifts as clues to predict when money may rotate between Bitcoin as the steady blue-chip vs. riskier emerging projects with crypto cycles. But the main takeaway is that tracking Bitcoin dominance keeps your finger on the pulse of its evolving power struggle with competitors. In bear markets, altcoins typically lose value faster than Bitcoin, while during the recovery, the opposite can be true.

• Over the years, a lot more resources and capital have been poured into the cryptocurrency and blockchain sector.
• Therefore, the BTC dominance ratio shows when the crypto market is experiencing tectonic shifts, which is almost always a great chance to acquire long or short positions on specific assets.
• By tracking the movement of BTC, valuable insights can be gleaned, providing information that can project the overall market trends.
• It’s also worth noting that BTC dominance can be influenced by a variety of factors.

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.

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 https://crypto.com/university/what-is-bitcoin-dominance 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.

What is Bitcoin Dominance Index?

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.

How to use Bitcoin dominance

For example, on July 19, 2022, Bitcoin’s dominance percentage plummeted to 41%, its lowest point since April. Analyzing Bitcoin’s dominance in tandem with its price can be a good way for people to interpret basic trading signals. Traders can use an umbrella set of principles to decide whether to buy or sell Bitcoin. Bitcoin’s global recognizability has led to increased accessibility to cryptocurrencies overall. Crypto, with Bitcoin at the forefront, has become an acceptable payment method in some online spaces.

Manage Risk

Bitcoin’s dominance in the market typically indicates a conservative approach by investors who prefer stability. Conversely, a low may indicate an increased interest in altcoins and a heightened appetite for risk. This scenario is the inverse of the previous one, where BTC’s market cap is declining, but the rest of the market is suffering even more. This condition has always signalled the arrival of an altcoin bear market within the entire industry, and it mostly happens after the bull run cycle is over.

Positive And Negative Sides of the Dominance

This means that half of the total value of all cryptocurrencies is held in Bitcoin. For example, when bitcoin dominance goes on a rally, traders can decide against buying altcoins for the foreseeable future, to protect their hard-earned capital. Market conditions, on-ramping via stablecoins, changing trends and new coins and projects all influence the bitcoin dominance in one way or another.

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.

A good way to estimate the size of the Bitcoin market is to compare BTC with other major asset categories such as gold, U.S. stocks and the U.S. dollar. We can do this by adding together the estimated market capitalizations of these asset classes and calculating the “market share” of each. Currently, Bitcoin has a 1.47% share when compared to gold, the U.S. stock market and the U.S. dollar. Large-cap cryptos typically have a market cap of $10 billion, while mid-cap ones offer more volatility and growth potential. With their volatility and riskiness, small-cap cryptocurrencies may have the potential for short-term growth. In January 2024, Bitcoin’s market cap was $843 billion, primarily due to its position as the leading crypto coin in the market.

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.

As an avid learner and advocate for AI and crypto, Rafayel stays up-to-date on the latest trends and innovations in both fields. The activity in the Bitcoin market is somewhat influenced by the state of the world economy–worries about inflation and currency depreciation often affect investors’ decisions. The advancements and modifications to regulations influence Bitcoin Dominance. Compared to other, more recent initiatives, Bitcoin, being the first and most well-known cryptocurrency, frequently reacts differently to regulatory news. Positive regulations may make Bitcoin seem more respectable as an investment, increasing its domination.

However, it was the emergence of meme culture that propelled Bitcoin into the mainstream consciousness. Memes, known for encapsulating complex ideas into easily shareable formats, played a crucial role in popularizing Bitcoin and engaging wider audiences. In this article, we’ll take a look at what Bitcoin dominance is, the key factors that affect it, the advantages and disadvantages of Bitcoin dominance, and more. Please note that the availability of the products and services on the Crypto.com App is subject to jurisdictional limitations. Crypto.com may not offer certain products, features and/or services on the Crypto.com App in certain jurisdictions due to potential or actual regulatory restrictions. So, before making any final investment decisions, be sure to double-check your conclusions with your peers or use complementary ratios to acquire more certainty.

To properly understand this concept, it’s important to learn about market capitalization. Crypto traders and investors continue to seek ways to predict the trends of altcoins with the number of them available in the crypto market being on a steady rise. One of the solid indicators that can help to predict the general trend of altcoins and give you an idea of what happens next in the market is Bitcoin (BTC) dominance. When Bitcoin is performing well, it often attracts more investment, leading to an increase in its dominance. By monitoring bitcoin dominance, market participants can gauge market sentiment and make informed decisions regarding trading strategies and portfolio allocations.

Bitcoin’s market capitalization is currently $ 1.17T while the total crypto market cap is $ 2.08T. When the Bitcoin dominance is high, it indicates that Bitcoin holds a significant share of the total cryptocurrency market cap. Conversely, when Bitcoin dominance is low, it means that altcoins are gaining traction and capturing a larger share of the market cap. This is used to gauge asset overvaluation or undervaluation due to investor exuberance or pessimism. By analyzing BTC dominance and price trends, investors can make informed decisions about allocating more to BTC or altcoins.

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.

For one, they point towards the large influence of trading activity between Bitcoin and Ethereum in the dominance metric. Second, they argue that stablecoins can be traded in for Bitcoin and Ethereum, essentially showing how much investors are willing to engage with “regular” cryptocurrency. A decrease in Bitcoin dominance suggests that altcoins are gaining market share relative to Bitcoin. This could mean that investors are more willing to take risks on lesser-known assets for potentially higher returns. The historical performance of Bitcoin dominance is an important metric when assessing the overall health of the cryptocurrency market.

Before making financial investment decisions, do consult your financial advisor. This means that Bitcoin now represents half of the crypto sphere’s massive $1.1 trillion market capitalization. In other words, Bitcoin’s current market capitalization stands at roughly $519 billion, as noted by Coingecko.

Anyone who knows anything about cryptocurrency knows that it was born with Satoshi Nakamoto and Bitcoin (BTC) in 2008, with BTC being mined for the first time in 2009. Being the first cryptocurrency, Bitcoin occupied the whole market, and thus had full market dominance. This means that Bitcoin accounted for 39% of the global cryptocurrencies when the calculation was performed.

Bitcoin dominance is an important metric because it indicates the level of investment and interest in Bitcoin compared to other cryptocurrencies. A high Bitcoin dominance percentage suggests that Bitcoin holds a significant portion of the market, indicating a preference or higher confidence among investors for Bitcoin over other cryptocurrencies. Conversely, a lower dominance can imply a growing interest and investment in alternative cryptocurrencies (altcoins). It’s a useful metric for assessing the current state of the market and can provide some insights into the strength and popularity of Bitcoin. Bitcoin’s dominance can be used by traders as a buy or sell signal when taking into account other factors.

In other words, it’s a measurement of Bitcoin’s share of the overall crypto market. Some in the crypto space are questioning its reliability as a market indicator, given the complexity inherent within the crypto ecosystem. There are also other factors unaccounted for in the ratio, such as lost bitcoins and market liquidity, which can affect Bitcoin’s market cap and, thus, skew the metric.