Bitcoin is the largest digital currency in the world as per market capitalization and demands a big portion of the trading volume in the digital currency space. If we have a look at the summative market cap of all prevailing digital currencies, then we can come to a total market capitalization for the whole digital currency space. Hence, the Bitcoin dominance is illustrated as the ratio between the market capitalization of BTC to the rest of the digital currency space.
What Is Bitcoin Dominance?
Bitcoin dominance alters from day to day as the market flows and ebbs, but BTC has consistently taken up a huge portion of the digital currency market over the last few years.
BTC dominance implies the percentage of the total market cap that BTC portrays. At the time of writing, BTC’s dominance is nearly 40 percent. This implies that BTC makes up 40 percent of the total value of all digital currencies. At its highest point, BTC dominance was at nearly 82 percent. This implies that the market capitalization of Bitcoin was greater in comparison to that of all other cryptos combined. As per the definition of Bitcoin dominance Binance,
“Therefore, the Bitcoin dominance is described as the ratio between the market cap of Bitcoin to the rest of the cryptocurrency markets. For many years, while Bitcoin was far and away from the largest cryptocurrency – and one of the few in existence – its dominance was much closer to 100% than it is today.”
What Does Bitcoin Dominance Imply For Traders And Investors?
For one, it portrays that BTC is still the king of digital currencies. It is the most broadly known and most broadly traded crypto, so it naturally has the biggest market cap. The dominance of BTC also implies that it is crucial as it offers us an idea of how much influence BTC has over the crypto space. A high BTC dominance implies that Bitcoin is more influential in comparison to other digital currencies. This can be bad or good depending on your aspect.
For BTC investors, a high BTC dominance is good as it implies that Bitcoin is more likely to go up in value when the digital currency space as a whole increase. On the contrary, a low BTC dominance implies that BTC is less influential and hence more fluctuating.
What Is Altcoin Dominance?
When altcoins are doing good as well, Bitcoin dominance 2022 usually goes down. This is because investors are selling BTC to purchase altcoins. Altcoin dominance is the percentage of the complete market cap that altcoins hold. At the time of writing, the dominance of altcoin is nearly 60 percent.
Keep one thing in mind that there are now close to 20,000 altcoins in the crypto space, so even a small portion of the total market cap can portray a large amount of money.
The reason why BTC and altcoin dominance is crucial is that they offer us an idea of which direction the industry is going. If BTC dominance is increasing, it implies that BTC is gaining a share of the market. This usually occurs when the value of BTC goes up or when altcoins decrease in value. On the contrary, if BTC dominance is decreasing, it implies that altcoins are doing well relative to BTC. This usually occurs when the value of BTC goes down.
Tips For Trading During Bitcoin Dominance
There are several things to pay attention to when trading during BTC dominance. With that, let us have a look at the tips.
- First, you require to evaluate what BTC dominance is and how it impacts the market.
- Second, you are required to pay attention to the trend. If BTC dominance is increasing, it implies that BTC is receiving a market share. This is usually a good time to purchase bitcoin.
- Third, you are required to be aware of the risks associated with trading during BTC dominance. The most evident risk is that BTC could lose market share to the altcoins. This would create the value of BTC to go down.
- Finally, you are required to have a plan for both purchasing and selling BTC. We cannot anticipate the future, but having an idea will help you make the most of any market situation.
There is no assurance when it comes to trading, but if you evaluate Bitcoin dominance and the trends, you will be in a better position to do successful trades. Curiously, BTC dominance is often impacted by the so-called “alt seasons”, where altcoins received market share relative to BTC, thus decreasing the dominance of Bitcoin as per the Bitcoin dominance chart.