What is Bitcoin Dominance and why is it important?


Bitcoin no introduction needed. is cryptocurrency more popular. This opened the door to mass adoption of the technology blockchain, P2P transactions and decentralized finance. Without a doubt, Bitcoin is the cryptocurrency with the most history. It is also the digital asset with the most market dominance.

Bitcoin was put into use in 2009. At that time, it accounted for practically 100 percent cryptocurrency market. Its domain was common in the newly created ecosystem. Over the years, other projects started to grow, e.g Ethereum i.e Litecoin. Bitcoin’s dominance has declined as more projects have emerged and the cryptocurrency market has diversified.

In this guide:

Bitcoin Dominance Chart

What is a Bitcoin Domain?

An asset’s domain is defined as the ratio of its market capitalization to its total capitalization multiplied by 100. In the case of Bitcoin, this would be:

BTC domain = (Bitcoin uppercase / all uppercase) * 100

The domain is obtained as a percentage that reflects the value of the property in relation to the total market value. When it comes to the cryptocurrency market, the difference between Bitcoin and altcoins turned Nakamoto into currency dominance analysis tool quite useful.

Bitcoin dominance over others cryptocurrencies: CoinGecko

Generally speaking, an increase in BTC dominance means that it is growing against altcoins. Some of the consequences may be:

  1. Bitcoin suffers less than altcoins during corrections, especially in bear markets.
  2. The supply of BTC is increasing due to the increasing activity of miners.
  3. The total market capitalization is decreasing, but only marginally bitcoin price.
  4. There is a general increase in the total market capitalization and the price of Bitcoin is rising aggressively.
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Why use only Bitcoin domain?

It is enough to compare the dominance of Nakamoto’s currency, about 36.5%, with Ethereum, which is almost 16.5% (at the end of November 2022). Also, the importance of Bitcoin’s dominance is obvious Fear and Greed Index. It is used as the main factor in calculating the index, its weight is 15%.

The formula for BTC dominance can be used Find the ratio of any cryptocurrency. Why don’t we use the domain of other digital assets then? At most, because Bitcoin is the most dominant cryptocurrency.

Bitcoin tops the list

Factors Affecting Bitcoin’s Dominance

bitcoin price

BTC price and dominance are directly proportional. When altcoins, but they weren’t that popular yet, Nakamoto’s currency dominance was around 90%. then with rise altcoinseverything started to change.

Altcoins

Bitcoin’s popularity has a bit to do with its dominance. This has led to the growth of alternative projects and networks I’m doing reducing it. Investor interest in new cryptocurrencies is a factor that directly affects the dominance (and price) of BTC.

There are over 20,000 digital assets on the market. It is easy for investors to “exit” Bitcoin and try new projects. Many of them are promoted thanks to the social media trends that generate hype, the movement of capital out of Bitcoin is encouraged to other cryptocurrencies.

Stable coins

Satoshi Nakamoto created Bitcoin Execution of P2P transactions. Las stable coins they can usurp your place. The growing popularity of these assets, most of which are pegged to the US dollar, could undermine Bitcoin’s dominance.

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A good example is the three main ones stable coins. USDT, USDC and BUSD are among the top ten cryptocurrencies with the largest market capitalization. The dominance of this asset is minimal compared to Bitcoin, but it should be remembered that the dollar Tether need time to stay Third largest cryptocurrency market capitalization. Its dominance exceeds 7%.

Market conditions

The state of the market can also affect the dominance of BTC. By the way, Nakamoto’s currency has a certain stability after more than a decade of existence. This allows your domain to sustain (or even grow) through bear markets.

In this sense, it is more likely altcoins are affected by fluctuations in the overall market capitalization, which has a positive effect on the dominance of BTC. Conversely, dominance in a bull market may decline despite an increase in total capitalization (if investors prefer riskier assets).

BTC index

What is a Bitcoin Dominance Chart?

The dominance of BTC can be observed on the chart as well as on the index. This chart can be found on specialized websites such as CoinMarketCap and CoinGecko.

History

A number of investors have started using the Bitcoin dominance chart (Bitcoin Dominance Chart) in 2017, although it became popular in 2017 in 2021 with rise altcoins. It is currently considered one of the indicators more reliable, with a component that is more important than technical.

Bitcoin domain. Font: Trade view

Bitcoin Dominance Chart Tool

Risk avoidance

The graph shows that BTC’s rise in dominance is associated with greater risk aversion among investors. This usually happens in slow markets where Bitcoin seems to be the best option. trade.

Market vision

Bitcoin stability is often tied to total market capitalization, but indirectly.

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Bitcoin Dominance (April 2019 to June 2021)
Total Capitalization (April 2019 – June 2021)

These charts show that in 2019 As Bitcoin’s dominance has increased several times, the total market capitalization has remained flat and small. there were few altcoins in the game. However, when in 2021 in June domain started to decrease, overall capitalization increased.

to trade with a domain graph

At Binance you can to do trade with BTCDOM/USDT through perpetual futures. In short-term trading BTC dominance and leverage enables strategies to be implemented trade interesting.

BTC dominance is for sale

Forward contracts are like standard futures contracts, but without an expiration date.


Advantages of Bitcoin Dominance Chart

Using the BTC domain graph provides certain advantages:

  • Probability of detecting the beginning of bull and bear markets.
  • Probability of detecting reversal patterns.
  • probability of detection other seasons (phases in which altcoins overall price increase).
  • In bear markets…

Source: news.google.com

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