Overview of BTC Dominance
What is BTC Dominance
Bitcoin Dominance or BTC.D, BTC Dom is the market dominance ratio of Bitcoin over the total capitalization of the entire cryptocurrency market. This data parameter allows investors to determine the next trend of Altcoins based on BTC.D such as:
When BTC Dominance increases, it means money flows into BTC and the prices of Altcoins will go down.
When BTC Dominance drops, it means money is flowing to Altcoins or Stablecoins.
Bitcoin Dominance is just one of the indicators for the next trend. We cannot depend entirely on this index to make investment choices.
Formula to calculate BTC Dominance
BTC.D = Bitcoin Capitalization (BTC) / Total Cryptocurrency Market Capitalization
For example: Total market capitalization is $1,600 billion USD and Bitcoin capitalization is $700 billion USD, so the BTC.D index will be equivalent to:
BTC.D = 700 / 1600 = 43,8 %
Currently, Dominance indices have been automatically calculated by charts or numbers through statistical websites such as Tradingview, coinmarketcap,...
The Importance of BTC Dominance (BTC.D)
Understanding the purpose of BTC Dominance can help you understand the movement of cash flow to predict the next trend of the market.
When BTC Dominance increases, it is a sign of money flowing to BTC.
When BTC Dominance drops, money flows into Altcoins or Stablecoins.
If the total cryptocurrency market capitalization increases, it can be seen that investment money is pouring into the Crypto market.
In case the total market capitalization decreases, it shows that investment cash flow is leaving the market and looking for shelter.
This index is especially useful for investors when planning investment plans and strategies in Altcoins. For Bitcoin investors, it is not necessary to pay attention to the BTC.D index because whether this index increases or decreases, it does not help investors predict the price trend of Bitcoin.
The connection between BTC.D and Altcoin
In the beginning when cryptocurrencies were just appearing, the Bitcoin Dominance index often fluctuated at about 95% or higher because Bitcoin was the main coin and dominated the market, there were very few Altcoins attracting investment cash flow.
As more and more Altcoins appear with increased quality and superior technology, attracting interest from investors, the Bitcoin Dominance index has decreased.
When ICO projects exploded in 2017, investing in Altcoins became trendy and Bitcoin Dominance dropped to as low as 35%. Since 2018, BTC.D has rebounded to nearly 70% when many altcoin projects failed and caused investment cash flow to withdraw from the project.
In March 2019, BTC.D once again increased to 50.3%. Investors have assumed that the decrease in the price of ETH will cause investors to return to investing in BTC to preserve capital, leading to an increase in the BTC Dominance index.
In 2021, the Bitcoin Dominance index began to decline as investment flows returned to altcoin projects along with negative news about Bitcoin such as energy consumption, environmental unfriendliness, and the event of China wiping out its production. Bitcoin mining, causing market tension and creating a terrible panic sell that caused BTC to drop 30% on May 19, 2021.
Tools to track the BTC Dominance Index (BTC.D)
You can refer to the following websites: trading view, coinmarketcap, coin360, coinecko... and this index is always updated in real time to help investors make accurate decisions at the right time.
summary
Through the above article, Trading insight has introduced you to the Bitcoin Dominance index and the importance of this index to investors.
Hope you make the right choices and invest successfully!
If you have any questions, please comment below the article for the team to answer.