Bitcoin (BTC) is the first and most well-known cryptocurrency in terms of market value and trading volume. Considering that all cryptocurrencies traded against Bitcoin and Bitcoin’s dominance might serve as a beneficial signal when trading all cryptocurrencies, these aspects are highly crucial.
This article will explain how to trade cryptocurrencies using the Bitcoin dominance indicator, as well as how to interpret the Bitcoin dominance index chart.
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New traders should learn from experienced ones. Start with Bitcoin (BTC) Dominance. What’s Bitcoin Dominance? BTC Dominance: How Important? How to calculate? You’ll love this article. Answers are below.
What is BTC Dominance?
Bitcoin (BTC) Dominance is Bitcoin’s market capitalization compared to all cryptocurrencies. This indicator shows if an altcoin is rising or falling vs Bitcoin. When BTC dominates, altcoin loses value and vice versa.
Most Bitcoin Dominance downtrends occur during positive markets. An aggressive bull market pushes the altcoin market cap above Bitcoin. Bullish or bearish markets don’t affect Bitcoin’s Dominance. Bitcoin Dominance is a ratio, not an absolute. Even if Bitcoin and other cryptocurrency values collapse, Bitcoin’s supremacy may not.
How to Calculate BTC Dominance?
Calculating the figure is easy based on BTC dominance. Divide BTC’s market cap by all other cryptocurrencies’.
The formula for BTC Dominance is below.
Bitcoin dominance = Bitcoin (BTC) market capitalization ÷ All other cryptocurrency’s market capitalization.
Example: If all other cryptocurrencies’ market caps are 100 million USD and Bitcoin’s is 70 billion USD, BTC Dominance is 70%.
How Does BTC Dominance Influence Altcoins?
BTC dominance measures the market’s trading volume in BTC vs. altcoins. When Bitcoin dominates, traders recommend owning more BTC. Traders propose keeping more altcoins if Bitcoin’s dominance decreases. Bitcoin supremacy and bear/bull markets are linked. Bull markets in altcoins could erode BTC’s dominance. In poor markets, traders may sell altcoins and buy Bitcoin.
Lower Bitcoin dominance may be positive, as it implies the crypto sector is increasing and investment is shifting to other projects. Pre-mined and forked currencies will inflate altcoin numbers.
Even as Bitcoin’s price climbs, its dominance can fall. When money floods the crypto market, including Bitcoin, it may migrate into altcoins. Bitcoin’s dominance may define the crypto industry, but there are other factors. When the market is bleeding money, altcoins may skyrocket. Invest carefully.
How to Trade Bitcoin Dominance?
Bitcoin trading is complex. Bitcoin’s dominance can fall if an alternative is dominant. An altcoin’s rise doesn’t mean others will. A slow market correction is possible. Consider cryptocurrencies’ goals and market impact. Stablecoin volume may temporarily increase. Stablecoins aid newcomers to crypto.
Bitcoin’s rise and fall can affect short-term trade. Bitcoin dips or rises due to loss aversion (FOMO). Never-ending cryptos. Some new cryptocurrencies generate a lot of excitement, drawing hundreds of millions of dollars from Bitcoin. Many new Bitcoin ventures fail or are scams, causing users to withdraw quickly. Bitcoin’s dominance may return.
Consider Bitcoin’s popularity. Before altcoins, Bitcoin dominated. Because of altcoins, Bitcoin’s dominance won’t return. BTC’s supremacy may rise if other nations legalize it. As altcoins gain traction, Bitcoin’s supremacy will fall. Bitcoin dominance nearing an all-time high might be a resistance point. Watch how BTC’s falling dominance affects altcoins.
