What is BTC Dominance? What does it mean? It always appears on price statistics and research sites! Why does it always go with the price, market cap of Bitcoin? Those are the questions most commonly asked by newcomers about the crypto market's parameters. So in the article below, the Virtual Currency Blog will share with you all related knowledge Bitcoin Dominance, follow along!
What is Dominance? What is BTC Dominance?
Dominance is a word in English, its meaning when translated as Vietnamese has "dominance and domination". And BTC Dominance is a specialized term in the field of cryptocurrencies, which is understood as the dominance rate of Bitcoin compared to the rest, in more detail is the percentage of capitalization that Bitcoin accounting for the total capitalization of the entire cryptocurrency market. This ratio represents the dominance and dominance of Bitcoin with other altcoins in the market. There are times when it accounts for 60-70%, currently fluctuating around 50-55%. You can view this index at Coin Market Cap. Or you can look on the page Bitcoin exchange rate on Blogtienao.
BTC Dominance rate calculated by the capitalization of bitcoin compared to the capitalization of all cryptocurrency markets worldwide. Therefore, the higher the market capitalization of Bitcoin compared to other altcoins, the higher the proportion of BTC Dominance. For example, there was a time when Bitcoin's market capitalization reached 9 billion USD, all other altcoins added only 1 billion USD, we have the following formula:
BTC Dominance = 9 / (9 + 1) = 90%.
At the time of this writing (March 28, 3), BTC Dominance reached 2019%, which is a high level compared to other altcoins. And we can also use this formula to calculate the ratio ETH Dominance or XRP Dominance to calculate the capitalization percentage of Ethereum and Ripple
Meaning of Bitcoin Dominance
Overall, BTC Dominance index represents the level of global market demand for Bitcoin. Bitcoin is considered the "original currency" of Cryptocurrency market. Most people have to buy Bitcoin or USDT if you want to get involved in the cryptocurrency market and convert from altcoin to Bitcoin to preserve your capital Altcoin decline. Bitcoin's price fluctuates only a little and holds its value for a longer period of time than altcoin. This is why BTC Dominance is always high even when the market is down or bullish.
In addition, in terms of data research, an increase in the Dominance BTC percentage indicator also signals a new bullrun, which is a sign of financial institutions and whales entering the market. When a huge amount of new money was added to Bitcoin, and altcoin holders also gradually changed to Bitcoin to prepare for a new rally. And after the bitcoin cycle increased, the money flowed from bitcoin back to altcoin.
In the crypto cryptocurrency market, there are usually 4 scenarios in which you take note of this analysis to guide your investment:
- The price of Bitcoin increased and the whole market increased. This is the most beautiful scenario that everyone wants to see, meaning that market confidence increases, the big players pour money into bitcoin and altcoin coins.
- Bitcoin price increased but altcoin decreased. This is the scenario at the time I'm writing this April 04, 2019, when cash flows from altcoins or from outside the market run in and just to buy Bitcoin.
- Bitcoin's price dropped, dragging the market down. This is a scenario that you often see, can be said to be the default because when he was happy, the whole court would be shaken.
- The price of Bitcoin went flat or decreased, in which the price of altcoin also went flat or increased. At this point Bitcoin is moving sideways and will start a new rally of altcoins. It can last 1-2 years, but I think it's only 1 year.
Therefore, you should always keep an eye on the BTC Dominance if you want to keep up with market trends.
What should we do when BTC Dominance increases?
As mentioned above, we will explain again:
- The price of Bitcoin soared, leading to a stronger confidence in the market, traders and investors who sold altcoins to buy Bitcoin and wait for profit or there would be more organizations pouring capital into it.
- The price of Bitcoin is down, this time the altcoin will drop even more, so to avoid heavy losses, many investors choose to sell USDT or BTC to preserve capital.
As BTC Dominance increased, capital from altcoins was withdrawn and poured into Bitcoin. At this point, altcoins are hard to rise sharply, but there are still potential projects that will grow strongly, they prove their potential, even an opportunity for them to break through than BTC (but it is very difficult. )
So at this time, you should buy and hold well-rated altcoins, such as Binance Coin, Litecoin, Ripple, ..., because at this moment the price of altcoins is very cheap, but you need to be careful because it can peak. , the bottom of today? but tomorrow's peak.
Important milestones of BTC Dominance
- In 2016: Bitcoin was below $ 100, without Ethereum at that time, when BTC accounted for more than 90% of market capitalization.
- In 2017, when the BTC boomed, from around mid-2017, ICO fund raising activities exploded, there was a time when the BTC Dominance index dropped to only 35%, the lowest at that time. At that time, the ratio of Ethereum reached 30% because the demand to buy ETH to participate in the ICO increased sharply.
- By the end of 2017, BTC Dominance recovered to over 65%, the highest level as of 4/2019. The reason is clear when BTC peaked at 20000 USD.
- In mid-January 1, BTC Dominance began to decline sharply, when the percentage of Bitcoin was the lowest of about 2018%. due to the profit taking by sharks, shifting to altcoin, then closing altcion makes the biggest drop in history for bitcoin and altcoin
- April 4 - July 2018, the BTC rate increased again, to nearly 07%, due to many extreme news from the SEC Securities Commission as well as a sharp increase from $ 2018 to $ 45.
- By the end of 2018: BTC witnessed a slow, catastrophic decline, discouraging the will of small investors but BTC Dominance remained at about 50%.
- In April 4, the BTC Dominance index was at 2019% -50%. The reason may be that investors are gradually regaining market confidence.
Above is the article "What is BTC Dominance? Summary of things to know about Bitcoin Dominance”Of the Virtual Money Blog, hopefully through the article you will better understand the BTC Dominace index, as well as the meaning and its role for the cryptocurrency market.
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