What Is BTC Dominance?
Bitcoin dominance, or BTC dominance, is measured as the ratio of the market capitalization of bitcoin to that of the rest of the cryptocurrency market. Some crypto investors and traders use bitcoin dominance as a guide to adjust their trading strategies and portfolio structures.
Source: Binance Academy
Quick Forecast, we may see a possible run for short-term sell-side then possibly a run higher = possible run higher on BTC then a lower BTC price delivery.
Introduction
While there are now thousands of altcoins out there, bitcoin, the original cryptocurrency, has remained the largest digital asset by market capitalization. Observing the dynamics of bitcoin’s share in the value of the overall crypto market, traders have spotted certain recurring patterns of market conditions. Some came to use BTC dominance as a guide for their trading behavior. In particular, BTC dominance is believed to offer insight into the current general market trend.
BTC dominance and market capitalization
In simple terms, market capitalization refers to the total value of a certain asset in circulation. For Bitcoin, the market cap is calculated by multiplying the current price and the number of BTC that have been mined so far.
You can calculate bitcoin dominance with this formula:
Bitcoin dominance = Bitcoin market cap/ Total cryptocurrency market cap
Factors influencing BTC dominance
Changing trends
Before the explosion of altcoins, it was not uncommon for bitcoin dominance to hover above 90%. As altcoins collectively gained more user and investor interest, bitcoin lost some of this almost undivided attention to other assets with greater price swings and projects boasting new exciting use cases.
While bitcoin was created to change how the transfer of value worked, crypto projects have evolved to do more. Unlike bitcoin, many altcoins are involved in different sectors, including gaming, art, and decentralized financial services beyond transferring money. Depending on the current trend, there may be more interest and trading around a particular type of crypto project. For instance, the explosion of NFTs may have caused BTC dominance to drop somewhat in favor of NFT-related tokens.
Over time, bitcoin has established itself as one of the more “stable” crypto assets. Traders’ interest in more dramatic price swings and associated profit opportunities that some newer altcoins offer can also affect bitcoin dominance, leading to funds flowing into riskier assets. In this case, the sectors these altcoins represent may not matter as much as the potential profits.
Bull or bear market
Over the last several years, there has been a general rise in the popularity of stablecoins, a trend that exerted sustained pressure on BTC dominance. More specifically, in a bear market or in times of volatility, stablecoins are often used to protect crypto investors’ funds amid falling prices. A stablecoin is an altcoin designed to maintain value equal to that of an asset with a more stable price, such as a fiat currency or commodity. Crypto investors and traders often use stablecoins to lock in profits without having to convert their crypto to fiat. When funds move out of the BTC market and into stablecoins, BTC dominance could go down.
The inverse is likely in a bull market. When the market is up, traders can be incentivized to move value from stablecoins into more volatile assets that offer more trading opportunities, like bitcoin. However, emboldened traders may also choose riskier options and pump liquidity into altcoins that are even more volatile than BTC, so the overall effects of favorable market conditions on bitcoin dominance are highly context-dependent.
On-ramping via stablecoins
Stablecoins offer a convenient way to access a wide variety of cryptocurrencies compared to using fiat. This is because while there are fiat-to-crypto exchanges called gateway exchanges, they can be restrictive and only offer the more popular cryptocurrencies and stablecoins. Crypto-to-crypto exchanges, however, often provide a more comprehensive selection of cryptocurrencies tradable with select stablecoins. Hence, people who want to trade specific cryptocurrencies may enter the market via stablecoins. Naturally, if a significant amount of new funds enter the market through stablecoins and not bitcoin, the total value of the crypto market increases, causing a dilution in BTC dominance.
Emergence of new coins
Sometimes, new coins that enter the market can gain popularity quickly, causing BTC dominance to decrease. Remember that bitcoin is “fighting” with every other cryptocurrency in the market, so the emergence of several popular altcoins at once may affect it. However, there’s a chance that these altcoins may lose popularity after the hype dies down. If that happens and funds are moved from these altcoins to BTC or out of the crypto market entirely, BTC dominance may rise again.
Using BTC dominance with current bitcoin price
Some people monitor bitcoin price along with bitcoin dominance to help them make trading decisions. Although they are not iron laws, here are some potential outcomes that various combinations of BTC price and dominance may be indicative of.
When the price and dominance of BTC are rising, it could signal a potential bitcoin bull market.
When the price of BTC is rising but BTC dominance is falling, it could signal a potential altcoin bull market.
When the price of BTC is falling but BTC dominance is rising, it could signal a potential altcoin bear market.
When the price and dominance of BTC are falling, it could signal a potential bear trend for the entire crypto market.
While these two factors do not imply a definite bull or bear market, historical observations suggest a correlation.
Bitcoin dominance, or BTC dominance, is measured as the ratio of the market capitalization of bitcoin to that of the rest of the cryptocurrency market. Some crypto investors and traders use bitcoin dominance as a guide to adjust their trading strategies and portfolio structures.
Source: Binance Academy
Quick Forecast, we may see a possible run for short-term sell-side then possibly a run higher = possible run higher on BTC then a lower BTC price delivery.
Introduction
While there are now thousands of altcoins out there, bitcoin, the original cryptocurrency, has remained the largest digital asset by market capitalization. Observing the dynamics of bitcoin’s share in the value of the overall crypto market, traders have spotted certain recurring patterns of market conditions. Some came to use BTC dominance as a guide for their trading behavior. In particular, BTC dominance is believed to offer insight into the current general market trend.
BTC dominance and market capitalization
In simple terms, market capitalization refers to the total value of a certain asset in circulation. For Bitcoin, the market cap is calculated by multiplying the current price and the number of BTC that have been mined so far.
You can calculate bitcoin dominance with this formula:
Bitcoin dominance = Bitcoin market cap/ Total cryptocurrency market cap
Factors influencing BTC dominance
Changing trends
Before the explosion of altcoins, it was not uncommon for bitcoin dominance to hover above 90%. As altcoins collectively gained more user and investor interest, bitcoin lost some of this almost undivided attention to other assets with greater price swings and projects boasting new exciting use cases.
While bitcoin was created to change how the transfer of value worked, crypto projects have evolved to do more. Unlike bitcoin, many altcoins are involved in different sectors, including gaming, art, and decentralized financial services beyond transferring money. Depending on the current trend, there may be more interest and trading around a particular type of crypto project. For instance, the explosion of NFTs may have caused BTC dominance to drop somewhat in favor of NFT-related tokens.
Over time, bitcoin has established itself as one of the more “stable” crypto assets. Traders’ interest in more dramatic price swings and associated profit opportunities that some newer altcoins offer can also affect bitcoin dominance, leading to funds flowing into riskier assets. In this case, the sectors these altcoins represent may not matter as much as the potential profits.
Bull or bear market
Over the last several years, there has been a general rise in the popularity of stablecoins, a trend that exerted sustained pressure on BTC dominance. More specifically, in a bear market or in times of volatility, stablecoins are often used to protect crypto investors’ funds amid falling prices. A stablecoin is an altcoin designed to maintain value equal to that of an asset with a more stable price, such as a fiat currency or commodity. Crypto investors and traders often use stablecoins to lock in profits without having to convert their crypto to fiat. When funds move out of the BTC market and into stablecoins, BTC dominance could go down.
The inverse is likely in a bull market. When the market is up, traders can be incentivized to move value from stablecoins into more volatile assets that offer more trading opportunities, like bitcoin. However, emboldened traders may also choose riskier options and pump liquidity into altcoins that are even more volatile than BTC, so the overall effects of favorable market conditions on bitcoin dominance are highly context-dependent.
On-ramping via stablecoins
Stablecoins offer a convenient way to access a wide variety of cryptocurrencies compared to using fiat. This is because while there are fiat-to-crypto exchanges called gateway exchanges, they can be restrictive and only offer the more popular cryptocurrencies and stablecoins. Crypto-to-crypto exchanges, however, often provide a more comprehensive selection of cryptocurrencies tradable with select stablecoins. Hence, people who want to trade specific cryptocurrencies may enter the market via stablecoins. Naturally, if a significant amount of new funds enter the market through stablecoins and not bitcoin, the total value of the crypto market increases, causing a dilution in BTC dominance.
Emergence of new coins
Sometimes, new coins that enter the market can gain popularity quickly, causing BTC dominance to decrease. Remember that bitcoin is “fighting” with every other cryptocurrency in the market, so the emergence of several popular altcoins at once may affect it. However, there’s a chance that these altcoins may lose popularity after the hype dies down. If that happens and funds are moved from these altcoins to BTC or out of the crypto market entirely, BTC dominance may rise again.
Using BTC dominance with current bitcoin price
Some people monitor bitcoin price along with bitcoin dominance to help them make trading decisions. Although they are not iron laws, here are some potential outcomes that various combinations of BTC price and dominance may be indicative of.
When the price and dominance of BTC are rising, it could signal a potential bitcoin bull market.
When the price of BTC is rising but BTC dominance is falling, it could signal a potential altcoin bull market.
When the price of BTC is falling but BTC dominance is rising, it could signal a potential altcoin bear market.
When the price and dominance of BTC are falling, it could signal a potential bear trend for the entire crypto market.
While these two factors do not imply a definite bull or bear market, historical observations suggest a correlation.