Bitcoin, known as the “original cryptocurrency,” has been making an impactful market on the global scale for more than a decade. As the market took an influential turn with the addition of more cryptocurrencies, the concept of Bitcoin Dominance (BTCD) came to light.
What Does Bitcoin (BTC) Dominance Mean?
According to the BTC dominance definition, BTCD is the ratio between the market capitalization of Bitcoin and the rest of the cryptocurrency markets. The higher Bitcoin dominance ratio is referred to as a more significant share of the Bitcoin market in the overall cryptocurrency market.
There are many proficient use cases of having Bitcoin Dominance (BTCD) as a metric for market analysis. Traders recognize this metric as essential in helping them take positions in the cryptocurrency market. Not only does it help them decide whether to put up a position, but it also guides them to enter the altcoin market instead of the Bitcoin market. This, however, needs an in-depth understanding of the BTCD chart that can be viewed across various platforms. If you have still a question in mind that what is bitcoin dominance then keep reading.
Relation of Bitcoin Dominance To the Overall Market Cap
Undoubtedly, Bitcoin has been the starter of this digital innovation in the global market. Seeing a dominant hold of Bitcoin in the cryptocurrency market, traders realize and recognize that the overall trend of the cryptocurrency market currently runs along with the flow of Bitcoin. In simpler words, Bitcoin controls the overall market flow and influx of money. The dominance ratio clarifies the position of the market, aligning with other metrics of influence. Any risk that hits the largest cryptocurrencies drives the market to a lower position, which reduces the total market cap.
The Effect of Bitcoin Dominance over the Altcoins
Back when there were lesser altcoins in the crypto market, the BTCD chart hovered around 95% of the total market cap, showing that Bitcoin held control of the market. Although this ideology has not changed, the BTCD charts have decreased to around the 40-50% line, clearly showing that Bitcoin currently holds half of the market capitalization. This has been changed with the influx of altcoins in the cryptocurrency market.
The BTCD chart is inclined to decide how the crypto market would work collectively. During a bullish market, the BTCD metrics dominate with higher readings. Although the market keeps going bullish, the investors quickly shift their focus from the increasing Bitcoin Dominance to altcoins. This is how the market rises while the dominance of Bitcoin decreases.
It should be remembered that Bitcoin Dominance is not the only metric to be viewed before investing in the market. It is an important metric, but investors need to look into more charts before making such decisions. Bitcoin Dominance, in conclusive understanding, brings up the idea of how Bitcoin, Ethereum, and others are propagating in the market. Whenever the Bitcoin market crashes, investors take their trades out from the altcoin market, which essentially increases Bitcoin’s Dominance by a lot. As a result, this metric explains why one should have a complete analytical understanding of the cryptocurrency market at any time.
