What is Bitcoin Dominance?

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What factors influence Bitcoin dominance?

However, as the mining process has become more complex over the years, significantly more powerful hardware is required and competition is much more fierce. Although BTC mining can still be lucrative, the barrier to entry is much higher. PoW allows anyone with the right hardware to contribute to Bitcoin’s validation process by solving complex mathematical problems. This involves verifying transactions, recording them in a block, and then adding that block to the chain.

The Most Popular Cryptocurrency: BTC Dominance Explained

• Software and hardware developments like hot and cold wallets have made crypto holding easy.
• The value of crypto assets can increase or decrease, and you could lose all or a substantial amount of your purchase price.
• When Bitcoin is performing well, it often attracts more investment, leading to an increase in its dominance.
• As such, Bitcoin’s market dominance has decreased over the years as more people know about DApps and altcoins become more widely adopted.
• On the other hand, decreasing Bitcoin dominance is often due to a spike in altcoin interest.
• This involves verifying transactions, recording them in a block, and then adding that block to the chain.

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.

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For beginners, these charts might seem daunting, but with a bit of guidance, they can be a valuable resource. Further, it soon became evident that Bitcoin did not just have the highest market cap, but is a longstanding beacon of crypto market longevity. At the same time, if Bitcoin skyrocketed, the altcoins would follow suit due to rising investor confidence.

Bitcoin Dominance and Market Cycles

This positive correlation between BTC and the overall crypto market cap indicates a strong market presence. The direction of the line is your first big clue in spotting potential uptrends and downtrends of the crypto market. An uptrend in Bitcoin dominance could mean investors are favouring Bitcoin, possibly viewing it as a safe haven during market turbulence. A downtrend might suggest growing confidence in altcoins, indicating a willingness among investors to diversify and take on more risk. Bitcoin dominance charts are a crucial tool for understanding the relative strength of Bitcoin in the cryptocurrency market.

About Binance BTCDOM Index

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.

What Is Dollar Cost Averaging (DCA) In Crypto?

In this article, we will explore what Bitcoin dominance is, how it is calculated, historical trends, and why it is important for crypto traders. Whether you are a beginner in digital assets, or are a seasoned trader, understanding this concept will enable you to make informed decisions amidst the unpredictable swings of the crypto market. Bitcoin dominance, BTC dominance or just BTCD is used to measure the ratio between Bitcoin’s market cap and the market cap of the entire cryptocurrency market. Traders have found ways to use this metric to predict bull markets, altcoin seasons and bitcoin rallies well before they started. At one point, Bitcoin commanded close to 100% share of the cryptocurrency market.

What Is Bitcoin Dominance? Detailed Guide 2024 OWNR Wallet

Altcoin investors can jump ship and invest in altcoins when BTC dominance decreases compared to altcoins. These strategies can be profitable if BTC continues to increase in value over time. BTC is the “gateway cryptocurrency” for crypto traders due to its high visibility, availability on almost every exchange, and deflationary supply. As market demand rises, BTC price rises, leading most other cryptos to follow.

Changing market trends

• This means that Bitcoin accounted for 39% of the global cryptocurrencies when the calculation was performed.
• 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.
• The more secure and stable Bitcoin’s network, the higher its dominance, as people place trust in it over newer, untested currencies.
• The higher the percentage, the more cryptocurrencies that will be lagging BTC on the whole normally.
• For example, coins like Ethereum, Cardano, and Polkadot have all, at different times, captured the market’s interest due to their unique features and potential for growth.
• Bitcoin dominance is the percentage of the entire cryptocurrency market capitalization held by Bitcoin.

Historically, Bitcoin dominance has been on a decline as more altcoins are emerging with unique propositions. In contrast, many technical analysis metrics, like moving averages, Relative Strength Index (RSI), or Bollinger Bands, focus specifically on the price action and volatility of a single asset over time. Years later, Bitcoin represented as much as 95% of the crypto market, which was still very small. Being the first cryptocurrency ever invented, Bitcoin was once responsible for 99% of the crypto market. Around 2019, the crypto market eased and corrected, and Bitcoin’s price continued to recover in tandem with its dominance.

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

Momentum traders can benefit from Bitcoin’s powerful network impact by simply trading on the momentum of Bitcoin. This can be a very profitable strategy if momentum traders can accurately predict the exact direction of the momentum. Bitcoin and Ethereum were designed to do completely different things, and they operate in very different ways, so it’s difficult to compare the two. Which one is “better” depends on what your own cryptocurrency objectives are. Bitcoin is certainly worth more — a lot more — but Ethereum can do things Bitcoin can’t, and vice-versa. It is available from almost every exchange in the world, including the biggest centralized exchanges, many of which allow you to purchase coins with a debit card in some countries.

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.

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.

Spot Trend Reversals

Bitcoin dominance charts visualize the percentage of total crypto market capitalization contributed by Bitcoin over time. 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. It provides valuable insights into market sentiment, guides trading strategies, aids in risk management, and helps in understanding market cycles. Traders should consider other market indicators and factors to make well-informed trading decisions. Understanding the relationship between Bitcoin dominance and Altcoin Season can provide valuable insights for cryptocurrency investors and traders.

What is the Difference Between Bitcoin (BTC) and Bitcoin Cash (BCH)?

Bitcoin dominance is an indicator which is constantly changing and evolving in response to a wide range of crypto market triggers. As such, there are multiple considerations for traders computing both of these market signals when it comes to whether to buy or sell Bitcoin or altcoins. BTC dominance is therefore a reflection of the proportion of the total value of all cryptocurrencies that is held in Bitcoin. It’s a key indicator of Bitcoin’s influence over other cryptocurrencies and the market as a whole. Furthermore, trading, investing, and converting Bitcoin into other cryptocurrencies are made simple by its liquidity and availability on a variety of cryptocurrency exchanges.

Now, we can multiply the two variables and come to around $825 Billion, roughly equivalent to today’s BTC valuation. Investors might use BTC dominance as a barometer to help them gauge the overall market sentiment and make decisions about how they should diversify their crypto portfolio. Investors can use BTC dominance as one factor to help try to manage their overall risk exposure to the cryptocurrency market. As a result of stablecoin on-ramping, the share of the entire crypto market valuation attributed to Bitcoin has been diluted and is shrinking. With the fall of USTC in 2022, however, this trend is not necessarily guaranteed to continue.

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.

• For instance, at the end of March 2023, Bitcoin’s market cap was about $543 billion.
• This is used to gauge asset overvaluation or undervaluation due to investor exuberance or pessimism.
• Instead, BTC dominance offers a macro view of Bitcoin’s position in the market.
• It’s just Bitcoin’s total value divided by the whole crypto market capitalization (minus Bitcoin itself).
• It’s crucial to remember that the bitcoin market is dynamic and ever-changing.
• The actual market domination of Bitcoin and Ethereum at this time may vary, thus it’s vital to use the most recent information available from reliable sources.

They launch with their own goals and objectives, but they operate in almost exactly the same way. As we mentioned above, Bitcoin laid the foundations for the rest of the industry by popularizing a number of technologies that have become critical to almost every other cryptocurrency. One of those is the proof-of-work (PoW) consensus mechanism for verifying cryptocurrency transactions, recording them on the blockchain, and minting new coins. There are many reasons for that, including the fact that it is the world’s first cryptocurrency.

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.

The Bitcoin dominance chart shows the correlation of these factors with the BTCD index. BTC dominance can be a useful metric for traders as it reflects the market’s sentiment towards Bitcoin versus altcoins. However, it should not be the sole basis for trading decisions; it’s best used in conjunction with other analyses. Bitcoin dominance is a useful metric for understanding the overall health of the cryptocurrency market, and can provide some insights into the current state of the market. Bitcoin dominance represents the ratio between the market capitalization of Bitcoin and the market capitalization of all other cryptocurrencies.

The market value of the second largest stablecoin, USD Coin, is about $33 billion. Some traders use a variant of Bitcoin dominance called the Real Bitcoin Dominance Index, which only takes into account coins that rely on the Proof of Work consensus mechanism. Since Bitcoin often dictates the rest of the marketplace, BTC dominance becomes a necessary metric to measure its impact at any time. 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.

The COVID-19 pandemic is an apt example of such a black swan event, effectively changing the global economy and eventually leading up to the most significant crypto bull run in history. The most obvious culprit in changing the BTC dominance ratio is the arrival of new altcoins. Every once in a while, a new crypto project enters the scene and accumulates massive hype behind its promising ideas. So, now that we have the concrete number of BTC market cap, it is time to calculate the BTC dominance ratio. For this, we must divide the BTC market cap by the overall crypto market cap number, which currently stands at $1.65 trillion. It is worthwhile to combine the BTC.D indicator with other tools to enhance our investment strategy.

• So, if the bear market is all but certain, some investors might sell BTC sooner than they sell Ethereum since it offers strong core utilities with smart contracts.
• However, certain altcoins have been able to outpace Bitcoin in terms of market capitalization, such as Ethereum.
• Further, it soon became evident that Bitcoin did not just have the highest market cap, but is a longstanding beacon of crypto market longevity.
• These sites offer detailed charts and analytical data on the market cap BTC dominance share compared to other cryptocurrencies.
• The ICO trend in 2017–18 caused dominance levels to hit their lowest of all time.
• This figure indicates the cryptocurrency’s popularity among investors and its position relative to other coins in the crypto market.
• By observing changes in bitcoin dominance over time, market participants can gauge the market’s sentiment towards bitcoin compared to alternative cryptocurrencies.

This indicator not only reflects the distribution of market capitalization among cryptocurrencies but also expresses the general sentiment of investors. A high Bitcoin dominance often indicates investors’ preference for reliability and stability. In contrast, a decrease in its dominance may indicate a growing interest in riskier coins, which is usually a sign of a bull market in the segment of these assets.

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.

The crypto money flow cycle is a concept used to describe the typical pattern of investment flow within the cryptocurrency market. This cycle is not a strict or guaranteed pattern but rather a general trend observed by some investors and analysts. Looking at historical data, a significant portion of the crypto market has generally followed the shape and direction https://crypto.com/university/what-is-bitcoin-dominance that Bitcoin takes (see diagram below). With this correlation, some suggest that Bitcoin dominance can also help in understanding trends in the altcoin market. Since Ethereum launched in 2015, thousands of other altcoins and tokens have been created. Before this time, Bitcoin was the only primary digital currency, so it enjoyed the entire market share.

However, smart contracts and stablecoins’ emergence have drastically diluted Bitcoin’s overwhelming market share. Newcomers and experienced traders can analyse this ratio to understand what’s going on in the BTC domain and the general crypto market. Analysing the BTC dominance ratio in a vacuum is not advisable, as it could lead to misleading conclusions. Instead, it is best paired with various analytics methodologies, like market sentiment analysis. 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. Starting strong, then hitting two rocky sections of its young existence, crypto is in an excellent position to thrive in 2024.

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.