Bitcoin Dominance: How it Works, why it is Important and how to calculate it?

In recent cryptocurrency trends, traders are trying to find new tools to forecast trends in digital currency. One of these tools is Bitcoin dominance.

Bitcoin Dominance is the percentage of a cryptocurrency’s total market cap based on Bitcoin. This helps you understand the trend of BTC and other altcoins.

Bitcoin dominance can be a powerful tool to help you determine if there is more profit in trading altcoins or Bitcoin. The terms “Bitcoin” (BTC) is often used interchangeably, but there is also the concept of “Bitcoin dominance.” In this article, we’ll discuss what Bitcoin dominance is and explain how investors can use it as a strategy to make their cryptocurrency investments more profitable.

In this article, you will find out the definition of Bitcoin Dominance and why it is a phenomenon that is occurring more and more as time goes by. This article also provides some recommendations on how to best utilize your money in the market.

What is Bitcoin Dominance?

Bitcoin dominance is the percentage of the total bitcoin currency in circulation. It is calculated by dividing the number of bitcoin transactions by the total number of bitcoins in existence.

This ratio can give us an idea of how the market perceives Bitcoin in comparison to the total cryptocurrency market. When we see Bitcoin’s dominance increase, it generally means there is an opportunity for investments and vice versa.

When BTC Dominance goes Uptrend, Alts Lose value against Bitcoin and when BTC Dominance goes downtrend, Alts gain value against Bitcoin.

This is one of the main tools we use. There are many different implications and it is up to you how much to rely on it. It is only one tool in a trader’s toolkit. On the other hand, a bullish or bearish market doesn’t typically affect the BTC Dominance ratio. The term refers to an absolute number rather than a percentage and calculations are based on a ratio that can change based on certain events.

Before traders can understand what Bitcoin dominance is, traders need to understand the concept of market capitalization.

How reliable is the measure of Dominance on Bitcoin?

One useful metric of the health of cryptocurrency markets is Bitcoin’s dominance. This metric provides a high-level overview for market similarity between different coins. However, the market is an extremely complex ecosystem. In general, no indicator should make assumptions that simplify the complexity.

However, using only Bitcoin dominance as an index on its own can lead to losses and inconsistent results.

To Understand Market capitalization

In the case of Bitcoin, market cap means the value of all circulating coins. To determine and calculate market cap, this is simple to calculate, the total market cap which is multiplying by the current market price.

Let’s suppose, June 2022 Bitcoin price is $21,000, Circulating supply is $19,077,700 or (Nineteen million seventy-seven thousand seven hundred) and the total market cap is $407,945,333,250 or $407 Billion. Calculating of Total Market cap is Bitcoin price $21,000 x Circulating supply $19 million = $400 Billion.

Cryptocurrencies make it easy for investors to determine the total supply of coins and their current price. This makes it simple to find and graph the market cap on a chart.

Although easy to view, very important to understand learn how to read the Bitcoin dominance chart. To use this indicator traders should visit coinmarketcap.com and tradingview.com. This is just one indicator that can be used in order to make a successful prediction when it comes to the market. It is important to always do your own research and have many indicators before making a trading decision.

Learn how to trade in crypto market by focusing on BTC dominance?

Trading with Bitcoin can be very profitable in the long-run, but it’s important for traders to keep an eye on BTC dominance ratio, so they can invest their money and start making more profits. The Bitcoin dominance ratio can help traders determine whether investing in an altcoin is better or if Bitcoin’s price will outperform.

If you want to learn more about trends in Bitcoin, there are different charts and price action offered such as tradingview.com and coinmarketcap.com.

Want to know the price trend of Bitcoin in a similar time frame? Use this table to help you determine an optimal buy/sell point.

Bitcoin Dominance IndexBitcoin TrendSignal
Ratio DowntrendBitcoin UpBuy altcoins
Ratio DowntrendBitcoin DownSell Bitcoin
Ratio UptrendBitcoin UpBuy Bitcoin
Ratio UptrendBitcoin DownSell altcoins

You can identify trading opportunities by watching the price, observing candlestick patterns, or other technical indicators.

Final Word

Analyzing the Bitcoin dominance ratio can help a trader understand market trends. By comparing the ratio to Bitcoin’s price, a trader can determine if the trend is more likely with crypto based on its current trend. The crypto market is new and therefore changes are likely. Even now, there are many other digital currencies that can rival Bitcoin. But for now, the dominance index gives traders a sense of what to expect.

As you can see, Bitcoin dominance is an important metric for traders to monitor. When the market sees a potential investment opportunity, Bitcoin’s dominance will increase. Conversely, when the market perceives a threat, Bitcoin’s dominance will decrease. This is one of the main tools that traders use to help make informed decisions about which cryptocurrencies to invest in.

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About The Author

My fascination with cryptocurrency and blockchain technology began in 2013. I also have an entrepreneurial spirit that has led to the creation of CryptoGuideToday, a blog that covers everything related to Blockchain and cryptocurrencies. I am passionate about educating people about cryptocurrencies and providing insight on blockchain technology. I am a strong believer in self-education being the key to success.

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