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 common among newcomers about the crypto market's parameters. So in the article below, the Virtual Currency Blog will share with you all related knowledge BTC.D, follow along!
What is Dominance? What is BTC Dominance?
Dominance is a word in English, its meaning when translated as Vietnamese has "dominant, dominant".
And BTC Dominance (btc.d or DOM) is a technical term, understood as Bitcoin's dominance rate over the rest, More detail is the percentage cap that Bitcoin accounting for over the total capitalization of the entire cryptocurrency market.
This ratio represents the dominance, overwhelming level of Bitcoin with other altcoins in the market. There are times when it accounts for 60-70%, Currently fluctuating around 50-55%.
BTC Dominance rate is calculated by the bitcoin capitalization of the worldwide crypto markets.
So, the higher Bitcoin's market cap compared to other altcoins, the higher BTC Dominance rate. For example, there was a time when Bitcoin's market cap reached $ 9 billion, all other altcoins combined with only $ 1 billion, 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 only fluctuates slightly and holds its value in the longer term than altcoins. This explains why BTC Dominance is always high even when the market is bearish or bullish.
In addition, in terms of data research, when the Dominance BTC percentage rise also signals a new bullrun, it is a sign that financial institutions, whales are entering the market.
As huge new money is poured into Bitcoin, and altcoin holders also gradually switch to Bitcoin in preparation for a new rally. And after the bitcoin cycle rises, the money flows back to the altcoin again from bitcoin.
In the cryptocurrency market, there are usually 4 scenarios that happen, pay attention to 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 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 falls, dragging the market down. This is the scenario you see very often, can be said to be the default because when the king is sick, the whole court will shake.
- 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:
- DOM increased and Bitcoin price increased strongly, making the confidence of the market strong again, traders and investors selling altcoin to buy Bitcoin and wait for profit or there will be more organizations to pour capital into.
- DOM price increase Bitcoin price decreases, at this time altcoin will drop even more, so to avoid heavy losses, many investors choose to sell USDT.
- Dom decreased, btc price increased, most altcoins increased, and grew stronger than btc.
- Dom falls, and the price of btc falls, it's time to look at the capital flows of the market. It is possible to plummet alt at first, but then bounce back and higher before falling.
As BTC Dominance increases, the capital from altcoins is gradually withdrawn and poured into Bitcoin. At this time, altcoins are difficult to increase strongly, but there are still potential projects that will increase strongly, they prove their potential, even an opportunity for them to break out more than BTC (but very difficult. ).
So for now, you should buy and hold well-rated altcoins, have a good product, and it's best not to over-price.
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.
- 03/2020, price crashes, then bounce back, and we saw the btc rise from $ 3800 to $ 41000 by the end of 2020, early 2021 making the DOM pop up to almost 74%.
Above is the article "What is BTC Dominance? Summary of things to know about Bitcoin Dominance"Of the Virtual Currency Blog, hopefully through the article you will understand more about the Dominace BTC Index, as well as its meaning and role for the cryptocurrency market.
Also, we have to consider a lot of other aspects besides btc.d, which is the TOTAL and TOTAL2 index, as well as the DEFI, USDT.D index, This one needs real combat experience and feel the flow of money. . So that's why the novice or SML.
If you have any of these questions, please go to the FB group of BTA to ask questions: https://www.facebook.com/groups/cryptoblockchainvietnam