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A few years ago, when cryptocurrencies started making a splash, the main hero was Bitcoin; there was no talk of other cryptocurrencies because there weren’t any. Now the model is different, albeit with some nuances. Many cryptocurrencies other than Bitcoin, also called altcoins, receive a significant portion of capital from investors. I say nuance because despite this, Bitcoin is still the champion, and altcoin prices are dancing to its tune. It is a clear sign of Bitcoin dominance or Bitcoin hegemony. when Bitcoin trading And other cryptocurrencies, we realized that Bitcoin Dominance more The rest represents a recurring pattern that we can benefit from. And get trend signals from the current market. I will teach you how to interpret it and what it can reveal.
Table of Contents
Bitcoin Dominance: What is it and how? Does it affect us?
Imagine that €80 billion is invested in the entire cryptocurrency market, and let’s say €40 billion is invested in Bitcoin (for example, since there are a lot of them, and they vary). In this case, BTC dominance is 50%. So what is it? Bitcoin Dominance? It is the capital invested in Bitcoin within the capital of all cryptocurrencies present in the market. Using the following formula, it will be easier to understand. BTC Dominance Formula: % Bitcoin Dominance = Bitcoin market cap / Total cryptocurrency market cap *100
Factors Affecting Bitcoin Dominance
Years after the Bitcoin boom, other cryptocurrencies have emerged (Alternative currencies) Recently, many new cryptocurrencies have emerged, such as Ethereum, Cardano, Dogecoin, and others, which have become more attractive to traders due to their volatility and price fluctuations. He was here when it was a field. Bitcoin price started to fallCryptocurrency also fell, for example, when China announced, for the umpteenth time, that it would ban cryptocurrencies. Therefore, the factors that affect this procedure are:
- Bitcoin price, if we look closely, the market cap follows the price of Bitcoin. When the former goes up, the latter goes up too.
- Altcoin fluctuations in cryptocurrency market cap. Investment in altcoins is on the rise; therefore, the value associated with Bitcoin is decreasing over time.
What does BTC dominance give us?
It provides us with Entry and Exit Signals in Bitcoin vs. Altcoin Market. In addition, it tells us where investors are heading and how the price is moving in the market. For example, to predict altcoin seasonBitcoin price declines, accumulation periods. Below we will see the concrete signs.
Where can you see the BTC dominance chart?
We can consult the chart from the well-known TradingView platform. Here is the updated chart for today:
How to read Bitcoin Dominance
The most important thing about BTC dominance is that it can help us know whether the altcoin market is bearish or bullish against Bitcoin. The following scenarios indicate when altcoin prices will rise or fall depending on BTC dominance:
Case 1: When BTC dominance rises, Bitcoin price rises.
This usually indicates a good season for Bitcoin and can be a buy signal.
Case 2: Dominance BTC value decreases, BTC price increases.
This could mean that altcoins are outperforming Bitcoin in a bull market and could represent an opportunity to buy altcoins.
Case 3: When BTC dominance increases, but Bitcoin price decreases.
This could mean that altcoins could experience a significant drop, and a good strategy here might be to withdraw funds from altcoins and put them into Bitcoin.
Case 4: When BTC dominance increases, but BTC price remains stable.
We will enter a market accumulation phase where we as traders buy Bitcoin in anticipation of an uptrend.
Case 5: Bitcoin’s dominance declines, price falls
This could indicate a potential downtrend for the entire cryptocurrency market. In this case, short selling bitcoin That would be a good idea.
Other questions that may arise
How do you know when it’s altcoin season?
As we have already seen, altcoin season It happens when Crypto alternatives to Bitcoin have risen significantly in comparison.which first happened in 2017, when all these altcoins came out. Bitcoin dominance can be a key indicator when predicting altcoin season.
BTC Dominance vs USDT Dominance
One of the most popular stablecoins is Tether (USDT), which was created to reduce volatility in the cryptocurrency world. It is usually the opposite scenario of the Bitcoin Dominance Indicator if we analyze its chart: USDT.D chart by TradingView So it would be good to take that into account for a more accurate technical analysis.
Finally
Remember this It’s just another tool in your toolbox.As with everything, this is not a dead letter, and you should not be guided solely by this metric when working. Combine your tools and indicators wisely. Finally, always Be careful with your bitcoinsThey are hackable and can be stolen. You can learn about the risks of leaving your cryptocurrencies on an exchange here.
Using Bitcoin cold wallets, which are affordable and considered one of the most secure ways to store your cryptocurrencies on the market, is the best way to avoid this kind of unpleasantness. If you have any doubts, I will wait for you in the comments 🙂
