The world of cryptocurrencies is proliferating. You might have heard about cryptocurrencies like Ethereum and Bitcoin, but that’s just scratching the surface. If you want to make money on crypto, you must learn about the market. The subject we will explain to you today is bitcoin dominance. It is one of the most critical metrics.
Bitcoin dominance is the percentage of the cryptocurrency market that Bitcoin represents. You can find it on sites like CoinMarketCap. It is essential because Bitcoin dominates in terms of price, volume, and popularity. It means that if you want to make money with other coins, you have to make sure that Bitcoin’s price doesn’t drop. It will probably drag all other coins down with it if it does. In other words, bitcoin dominance is a handy metric for traders.
Bitcoin Dominance over time
Take a look at the data from CoinMarketCap. Bitcoin’s dominance has been declining as many other cryptocurrencies have been introduced to the market. You can see that Bitcoin’s dominance is at its lowest level ever recorded.
The trend for Bitcoin dominance
Bitcoin dominance started growing steadily in 2012. It reached its highest level in November 2013. At that time, Bitcoin’s dominance was about 95%. It means that more than 95% of the total cryptocurrency market capitalization was tied to Bitcoin.
Since then, Bitcoin’s dominance has been on a downward trend. This is good news if you are interested in making money with other coins.
How do you use bitcoin dominance?
Bitcoin dominance can be used in two ways. Firstly, it is an excellent tool to decide what to invest in. If you want to make money on altcoins, you need to see which coin shows growth. Then it would help if you saw how much of the market it represents. If it is significant, you should go for it. Secondly, bitcoin dominance can be used as a predictor of price. If you want to make money with Bitcoin, you need to determine which direction the trend is going. For example, we found it surprising that bitcoin slots are massively on the rise in the global gambling industry.
What does bitcoin dominance mean for investors?
If you invest in Bitcoin, you do not worry about altcoin prices. When altcoins are going up, they will probably pull Bitcoin up. If you want to make money with other coins, you have to make sure that they don’t drop or drag Bitcoin down with them.
Using bitcoin dominance in trading
If you want to make money with trading, you can use bitcoin dominance to predict price. If you see that Bitcoin’s dominance is getting higher, it means that some serious money is going into the market. Traders can consider this an indicator to start buying. If they do, they will push the price up. The more money that goes into the market, the higher the price.
Bitcoin dominance as a leading indicator of price
As we said above, bitcoin dominance is a leading indicator of price. For example, if a vital exchange adds support for a new coin, it can significantly increase its price. If you want to make money on altcoins, you have to be aware of this. If you want to make money with crypto, you need to stay tuned to the latest news.
What is the difference between bitcoin dominance and market cap?
Bitcoin dominance and market cap are two different things. Market Cap is the total value of all of the coins in circulation. It is calculated by multiplying the current Price by the total number of coins in circulation. If you want to know the market capitalization, you have to take the current price and multiply it by the total supply of coins. We explained this in more detail in our article about cryptocurrency market capitalization.
Bitcoin dominance is different because it shows how much power one coin has compared to others. It means that when you compare Bitcoin and Ethereum, for example, it doesn’t matter if one coin has a higher market cap than another coin, and it doesn’t matter if one coin is more expensive than another coin. If Bitcoin is five times more dominant than Ethereum, then you can be sure that the price changes of Bitcoin will be five times bigger than the price changes of Ethereum.
Now you know what bitcoin dominance is, and you know that it is essential. At the same time, you saw several reasons why Bitcoin’s Price can be very volatile. It would help if you kept in mind that understanding bitcoin dominance is essential before investing in any other coin.
