An Intro to Bitcoin Dominance
Figure A
Bitcoin Dominance is derived via a formula, but it means more than just a ratio. Bitcoin Dominance is used by traders, analysts, and many others to forecast the next move the market may make. This article will discuss how monitoring Bitcoin Dominance may* help you make better judgment when investing in crypto.
Content:
General Information-
What is Bitcoin Dominance?
How is Bitcoin Dominance calculated?
Additional Information-
Do traders use Bitcoin Dominance?
Will Bitcoin Dominance keep dropping?
General Information-
1. What is Bitcoin Dominance?
Bitcoin Dominance is a formula that includes Bitcoin’s market cap divided by the total cryptocurrency market cap per Figure A. The Bitcoin Dominance ratio is utilized to forecast the next leg of the total market.
2. How is Bitcoin Dominance calculated?
Below is an image with two red underlines on the market cap of Bitcoin and the total market cap. At the time of writing this if you were to divide the two, it would equal the square which equals Bitcoin’s dominance. ($555,581,583,538 / $1,250,758,273,598 = 44.5%)
Figure B
Additional Information-
1. Do traders use Bitcoin Dominance?
Yes, most traders who understand Bitcoin Dominance love it. Bitcoin Dominance is used for multiple things. Some traders use “/BTC” pairs to stack their bitcoin while using BTC.D(Bitcoin Dominance) to gauge altcoins in their favor. Others use BTC.D to understand when an altseason may occur. On the other hand, it may be used to understand when Bitcoin will reclaim its dominance and make alts bleed while it's the only coin rising in value. Finally, BTC.D is a versatile tool that is quite helpful when forecasting. Below is an image that helps investors understand how Bitcoin Dominance may be utilized to forecast future price movements. It is important to note that no one* indicator or metric should be applied to make a decision. So while BTC.D is useful in predicting price action, you should always contact a financial advisor before executing any trades.
Figure C
2. Will Bitcoin Dominance Keep Dropping?
In my personal opinion, I think Bitcoin's Dominance will keep dropping. Below is an image with two marks. In 2018 the lowest Bitcoin Dominance hit was 35.5%, and in 2022 the lowest Bitcoin Dominance hit was 39.1%. In between those four years, we have seen an additional 15,000 currencies added to the crypto market. We also witnessed new use cases for cryptocurrencies introduced. The blockchain will continue to solve new use cases that people never imagined. So as innovation continues, it will naturally make BTC.D decrease to new all-time-lows over time.
Figure D