BTC Dominance Explained: What is Bitcoin Dominance (BTC.D)?

Bitcoin Dominance is one of the most useful indicators that show you the movement of Bitcoin. In this article, I will introduce you to Bitcoin Dominance and why it is important to acknowledge this useful tool.

quangphan

Published Dec 01 2020

Updated 6 days ago

4 min read

Bitcoin is the largest cryptocurrency by Market Capitalization up to this moment. Therefore, it has a huge impact on the crypto market. Following the movement of Bitcoin gives you plenty of insightful information.

Bitcoin Dominance is one of such indicators that show you the movement of Bitcoin. In this article, I will introduce you to Bitcoin Dominance and why it is important to acknowledge this useful tool.

What is Bitcoin Dominance?

Bitcoin Dominance (BTC.D) is the percentage of Crypto’s Market Capitalization that BTC alone takes up. For example, the whole Market Capitalization of the Crypto Market is $1T, and that of BTC is $500B. We can easily calculate Bitcoin Dominance to be 50%.

As the first and biggest cryptocurrency, Bitcoin has had its dominance of 100% at an all-time high. However, as the market grows and more tokens start appearing, Bitcoin slowly loses its dominance to reach an all-time low of 35.41%.

You can check out the chart of Bitcoin Dominance on TradingView here.

Learn more: What TradingView is and how to use it

Why is Bitcoin Dominance important?

Bitcoin is not only the most massive cryptocurrency but also the leading one. It can be witnessed that whether Bitcoin goes up or down in price, the majority of other cryptocurrencies follow. Therefore, Bitcoin Dominance, as an imperial indicator of Bitcoin, is important if you want to track the movement of Bitcoin in general and of the crypto market in particular.

For instance, if Bitcoin Dominance goes up, meaning Bitcoin is accounting for more of the total Market Capitalization while Altcoins are having less. In other words, Bitcoin will probably go up in price while that of Altcoins will go down.

What is Bitcoin Dominance used for?

Bitcoin Dominance is an extremely useful indicator for tracking the market. Specifically, Bitcoin Dominance will give you signals of how the current market is going, and how you should optimize your investing options.

Understanding Bitcoin Dominance

How is Bitcoin Dominance calculated?

Bitcoin Dominance is calculated by taking the ratio of Bitcoin’s Market Capitalization to the total Crypto Market Capitalization.

For example, the data Coingecko provides at the moment (May 24th, 2022) shows that Crypto Market Capitalization is 1.37 Trillion USD, while that of Bitcoin is $579.9 Billion USD. From there, we can calculate Bitcoin Dominance to be 42.33% (579/1370*100%).

what is btc dom — How to calculate Bitcoin Dominance using data provided by Coingecko

Bitcoin Dominance vs Altcoin Dominance

While they are two different indicators, they work in a similar way: Bitcoin Dominance shows how massive BTC is compared to the whole, while Altcoin Dominance refers to the statistics of Altcoins.

If Altcoin Dominance goes up, the money is flowing to Altcoins rather than Bitcoin, indicating a possible Alt season. On the contrary, if it goes down, the money is leaving from Altcoins to Bitcoin.

The effects of Bitcoin Dominance on the market

Overall, the effects of Bitcoin Dominance on the market vary. We highly recommend you use this infographic as a reference. There are 3 possibilities following each case.

what is btc dom 2 — How you should react to the market using Bitcoin Dominance and Bitcoin price as indicators

Bitcoin Dominance grows

Price up: The money is flowing from Altcoins to BTC.
Price down: The whole Crypto Market is down in general.
Price sideway: Investors are taking profits from Altcoins to Fiat/BTC.

Bitcoin Dominance declines

Price up: The money is flowing to BTC, possibly dragging Altcoins and the market as a whole to follow.
Price down: The whole Crypto Market is down in general.
Price sideway: The money is flowing from BTC to Altcoins. Bitcoin going on sideway means it will have little impact on the price of Altcoins, letting them freely grow. Good fundamental Altcoins will rise strongly during this period.

Bitcoin Dominance sideway

Price up: The money is flowing from outside of Crypto to BTC.
Price down: The whole Crypto Market is down in general.
Price sideway: BTC stands still, allowing Altcoins to grow without being impacted.

Advantages & Disadvantages of Bitcoin Dominance

Advantages:

A great indicator to track the market.
Useful to follow the movement of Bitcoin - the biggest cryptocurrency that leads the Crypto market.

Disadvantages: Should only be used as a reference, not a completely reliable indicator to predict the market.

How to use Bitcoin Dominance in trading/investing?

You can combine Bitcoin Dominance with other tools and indicators to improve your trading and investing experience.

As mentioned above, Bitcoin Dominance gives you a great idea of how the market is moving, therefore offering multiple optimal trading options.

At the same time, Bitcoin Dominance also has a chart that you can use to implement technical analysis like any other cryptocurrency. This is a great way to improve your trading results.

Learn more: Understanding Crypto Fear and Greed index

how to use btc dom — How you can use Bitcoin Dominance in technical analysis

Conclusion

This is everything you need to know about Bitcoin Dominance, or BTC.D. If you have any questions about Bitcoin Dominance, don't hesitate to leave a comment below. The Coin98 team will answer your questions as soon as possible.