Understanding Bitcoin Dominance

Published: Nov 04, 2023 Est. read time: 2 minutes

Understanding Bitcoin Dominance

Bitcoin, as you're probably aware, is by far the largest and most popular crypto asset. Largely because it was the first and revolutionized the whole peer-to-peer, decentralized sending of electronic 'money' as Satoshi coined it. "Bitcoin Dominance" is a term that helps us understand just how much does of the whole Crypto market does Bitcoin account for. Keeping a watchful eye on Bitcoin Dominance can offer valuable insights into the market's dynamics.

What Is Bitcoin Dominance?

Bitcoin Dominance is like a measuring tape that tells us what portion of the entire crypto market value belongs to Bitcoin. If the total value of all the cryptocurrencies in the market is a huge pizza, Bitcoin Dominance tells you how big Bitcoin's slice is. The larger the slice, the more dominant Bitcoin is. At the time of writing Bitcoin is over half the entire Crypto market!

Why Does Bitcoin Dominance Matter?

Bitcoin's dominance matters for a few reasons:

Market Mood: Bitcoin's performance often sways the entire crypto market. If Bitcoin is doing well, it can lift up the whole market, but if it's not, it might bring down the mood.

Investor Sentiment: Bitcoin Dominance can reflect what investors are thinking. A high dominance might mean investors are playing it safe, sticking with the tried and tested 'safest' crypto. A lower dominance could mean they're looking for new opportunities in other cryptocurrencies, also known as "altcoins."

Market Shifts: Changes in Bitcoin Dominance can signal shifts in the market. For example, if Bitcoin's dominance is falling it could mean altcoins are on the rise and diversifying the market. It's key to use the Bitcoin Dominance along side the overall crypto market market to monitor tread. As alts could be rising or falling independent of Bitcoin's dominance.

How Is Bitcoin Dominance Calculated?

To figure out Bitcoin's dominance, you take Bitcoin's market cap (the value of all Bitcoins combined) and divide it by the market cap of all cryptocurrencies together. Then, you multiply that number by 100 to get a percentage. This percentage is Bitcoin's share of the crypto market.

Bitcoin Dominance Isn't the Whole Story

While Bitcoin Dominance is a useful tool, it's not the end-all. It doesn't tell you about individual altcoins' performance, and it doesn't consider other important factors like liquidity or regulatory changes.

Summary

Understanding Bitcoin Dominance helps you get the lay of the land in the ever-evolving world of cryptocurrencies. It's a bit like a weather vane, showing you which way the wind is blowing in the crypto market. Whether you're just curious about the space or you're considering investing, keeping an eye on Bitcoin Dominance can offer valuable insights into the market's dynamics. But just like the weather, market conditions can change quickly, so it's always smart to look at the big picture and not rely on just one indicator.