A Guide to Bitcoin Dominance: Its Importance and Is It Declining?

 

The crypto ecosystem came to fruition with the emergence of Bitcoin in 2009. Since then, the space has matured tremendously. Growing not only as a legitimate asset class but also in terms of market capitalization and size. Over the last decade, a plethora of cryptocurrencies have appeared. These altcoins have accelerated the growth of the crypto market while impacting Bitcoin’s dominance over the years. That said, Bitcoin remains the largest cryptocurrency in market cap and share, with a major influence on the entire crypto ecosystem. Therefore, Bitcoin’s dominance has appeared as an indicator to spot trends in Bitcoin, the altcoin sector, and the market as a whole.

Contents
Understanding Bitcoin DominanceFactors that Influence Bitcoin’s Dominance The Importance of Bitcoin Dominance How to use Bitcoin Dominance to Spot Trends Identifying Alt-coin Seasons Identifying Other Market Cycles through BTC Dominance PatternsIncorporating Technical Analysis to Evaluate BTC DominanceClosing Thoughts and Considerations

Bitcoin dominance refers to the ratio or percentage of Bitcoin’s market cap compared to the rest of the cryptocurrency market. While Bitcoin’s dominance has declined, this ratio continues to serve as a useful indicator to analyze market trends. 

Understanding Bitcoin Dominance

Before delving into Bitcoin’s dominance, it is useful to understand the term market cap. The market cap simply refers to the total value invested in a given asset. A cryptocurrency’s market cap is determined by multiplying the total number of tokens or coins in circulation by the current price. For example, a total circulating supply of 19,355,143 BTC multiplied by the current price of each Bitcoin at $27,256.05, equates to a market cap of $572 billion. 

A snapshot indicating the key metrics required to calculate Bitcoin's market cap
Image via: CoinMarketCap

 Once Bitcoin’s market cap is determined, its dominance can be calculated by dividing it by the current global crypto market cap. Therefore, if Bitcoin’s market cap stands at $534 billion and the total crypto market is at 1.16 trillion, BTC’s dominance stands at 45.8%. 

Key metrics to calculate Bitcoin's dominance percentage.
Image via: CoinMarketCap

Factors that Influence Bitcoin’s Dominance 

Bitcoin dominance is a constantly changing metric. Bitcoin’s share in the crypto market has gone from over 90% a decade ago to below 50% at the time of this writing. The decline in Bitcoin’s overall dominance can be attributed to the rise of thousands of altcoins. The utility of altcoins has brought different narratives to the space, such as decentralized financial (DeFi) services, gaming, and non-fungible tokens. This has resulted in substantial interest and investment flowing into the altcoin sector and thereby diluting Bitcoin’s dominance.


Read More:  A Guide to Bitcoin Dominance: Its Importance and Is It Declining?


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