Bitcoin Dominance and what does it mean?

🥇 Bitcoin dominance has reached its highest since April 2021.

What Is Bitcoin Dominance?

Bitcoin dominance is the ratio between the market capitalization (market cap) of Bitcoin to the market cap of the entire cryptocurrency market. It’s also known as the Bitcoin dominance ratio and Bitcoin dominance index. When we compare this ratio to the trend of Bitcoin itself, we can learn more about opportunities the current market environment offers.

What Is Cryptocurrency Market Capitalization?

For a better understanding of Bitcoin dominance, let’s start with market cap. This term refers to the total market value of a cryptocurrency, and can be calculated by multiplying the number of coins or tokens in circulation by their current market price. For example, given that there are 19,348,206 bitcoins in circulation, and that each Bitcoin is priced at $29,992.29, the total Bitcoin market cap can be calculated using the following equation:

Total Bitcoin market cap = Number of bitcoins in circulation × Bitcoin price

How Is Bitcoin Dominance Calculated?

Bitcoin dominance can be calculated by taking Bitcoin’s market cap divided by the entire cryptocurrency market cap, thereby giving a percentage value.

At the time of writing , Bitcoin dominance is calculated to be 54.38% based on the following figures:

MarketCap:

$BTC $669.15B

Crypto currency Market: 1.27T

This percentage determines the value of Bitcoin to that of the total cryptocurrency market.

Relationship Between Bitcoin Dominance and Market Cap:

Bitcoin dominance uses Bitcoin’s market cap and the total cryptocurrency market cap in its calculation.

Generally speaking, the shape and direction of the total crypto market cap will follow that of Bitcoin. This is partly due to Bitcoin’s influence over the entire crypto market, since it’s the first, largest and most widely recognized cryptocurrency. Hence, when users look to enter the cryptocurrency market, they typically begin by buying Bitcoin because it’s the most popular cryptocurrency

Part 2 coming soon!