What is BTC Dominance & its effects ?

If you are a regular trader or visitor of the crypto world, you must hear about things when a token reaches its All-Time-High price or when the whole market crashes and a lot of people suffer losses. Such things are heard from time to time as the crypto market is very volatile.

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It is because of this volatility that a lot of people try to follow trends so that they can avoid losing their money. People who are on the lookout for the market trends would know about things like BTC Dominance and how it affects the rest of the crypto world.

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But if you are someone who is not familiar with these terms then this article was written especially for you. Learning about these things is important because it could lead to you having to suffer a great loss or earn a great profit. We all hope that it’s the latter.

What is BTC Dominance?

To put it in simple words, BTC Dominance is figured out when you compare the market capitalization of Bitcoin in the entire crypto market i.e. the total amount of Bitcoin's market cap as compared to the total amount of the market cap of the altcoins.

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What that means is that the higher the market cap of BTC is, the higher the BTC Dominance would be. After 2017, when a lot of other cryptocurrencies came into the market, the best time for bitcoin was in August 2019 when the BTC Dominance was at a spectacular 71%.

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We mentioned the best BTC Dominance after 2017 because back when Bitcoin was one of the only few coins on the market, it had no competition. There's not just the one BTC Dominance chart that you can observe and make your decisions upon.

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Other charts like the Real Bitcoin Dominance Index exist and they exist as they calculate the BTC dominance against the proof-of-Work coins. The reason behind that is that a lot of altcoins are not looking to compete with BTC. Stablecoins are one such example. 

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So it is essential to study the BTC Dominance chart because you would understand what the current market trend is. At the time of the writing of this article, the BTC Domincnace is at 46.39%. That means a major part of the market is still Dominated by BTC and the dominance is heading upwards as well.

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Effect of BTC Dominance On Altcoins

Both BTC dominance and Bitcoin pricing might have an impact on the altcoin market. The BTC dominance chart just serves to graphically convey people's sentiment.

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Bitcoin is the world's first and largest cryptocurrency. The vast majority of people regard it as a trustworthy asset in comparison to the many new cryptocurrencies. As a result, any beginner would gladly put their money into Bitcoin first, followed by any of the altcoins.

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Another truth is that Bitcoin has the highest market capitalization and is traded against all other cryptocurrencies such as Ethereum and Solana. As a result, the market movement can be predicted based on the characteristics of Bitcoin and the BTC dominance chart. To help us understand it better, let's look at a few examples.

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The BTC dominance chart illustrates how much of the overall trade volume is in Bitcoin and how much is in altcoins. A greater BTC domination would indicate that individuals are putting more money into Bitcoin and are bullish on Bitcoin rather than the altcoins.

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Based on market sentiment, even more traders would withdraw cash from altcoins and invest them into Bitcoin, leading the altcoin market to crash. To understand the effect of BTC dominance on altcoins even better, let’s take a look at the following table.

Relation Between BTC Dominance, Bitcoin and Altcoins

As previously stated, BTC dominance and Bitcoin's price have a significant impact on the overall market. Before investing or initiating a trade, studying BTC dominance charts can be advantageous since you will know when to enter and exit the market.

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The table below represents how the market operates in general. Let's look more closely at the bull and bear market possibilities.

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Bitcoin rising with its dominance is a clear sign of the BTC bull market. It's a good time to invest in Bitcoin as the trading volume is shifting towards Bitcoin. People would put their money into Bitcoin rather than altcoins, thus investing in altcoins won’t be a bad idea but investing in Bitcoin would make more sense.

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However, if Bitcoin's value grows as BTC dominance declines, then a good altcoin rally is more likely. Falling BTC dominance is a favorable indication for altcoins since money will flow through a variety of projects rather than just bitcoin.

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Hence, it will be beneficial for you if you understand how to read the BTC dominance and the altcoin charts. If you are able to predict the correct outcome or trend, then no one can stop you from increasing your profits. 

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Conclusion

We have explained what BTC dominance means and how it can affect the altcoin market in the simplest way that we could. But keep in mind that the whole process is not as simple. The crypto world is very complicated and where money is involved, things are ought to get intense.

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So what you should do is play the game with your brain rather than your heart. The lesser risks you take, the better your position would be. Wherever you invest your money, be it in BTC or in any of the altcoins, make sure that you study the charts beforehand and not make any mistakes.

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Even though the crypto market is unpredictable, sometimes predictions can work. It’s all about the research that you and a teensy bit about whether luck is on your side or not. 

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Do know that investing in coins is not the only option for you to earn money from the crypto market. You can do so by participating in fundraisers or some passive income techniques. To know more, check out our website.

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