What Is Bitcoin Dominance and How Do You Read It?

Hello, this is Bitpunk. Today we'll look at what Bitcoin dominance is, how to check it, and how you can use it in trading.

What Is Bitcoin Dominance?

Dominance means "control," right? Bitcoin dominance refers to how much control Bitcoin holds relative to the entire market. In other words, Bitcoin dominance means "the ratio of Bitcoin's current market capitalization to the total market capitalization of the entire crypto asset market."

For example, if Bitcoin dominance is 50%, it means Bitcoin's current market cap makes up 50%, or half, of the total market cap. To sum up, "Bitcoin dominance = total market cap / Bitcoin market cap".

Bitcoin dominance tends to rise when the price of Bitcoin goes up, but it can also rise when other altcoins fall sharply. Alternatively, dominance can fall when the price of Bitcoin drops or when other altcoins rise.

How Can You Use Bitcoin Dominance?

So how can you make use of Bitcoin dominance? First, we can think about a few scenarios. The first is when dominance rises along with the price of Bitcoin. In this case, it means most of the money is flowing into Bitcoin, so you can expect a bull market led by the market leader.

On the other hand, what about when Bitcoin rises while dominance declines? This could mean that an altcoin season (bull market) may be coming. Of course, it isn't right 100% of the time, but most altcoin seasons have occurred when Bitcoin dominance was falling.

So if you see Bitcoin trending upward along with signs of falling dominance, you might move part of your assets into altcoins or buy on the spot market to prepare for the coming altcoin season.

How to Check Bitcoin Dominance in Real Time

You can view Bitcoin dominance in real time on TradingView. Or, for those visiting here, I've embedded Bitcoin dominance and Tether dominance charts below, so feel free to use them as a reference.

Bitcoin Dominance and Market Strategy

Bitcoin dominance is a numerical measure of how much influence Bitcoin has across the entire crypto market. The table below shows common investment strategies based on Bitcoin's price movement and changes in dominance.