Nowadays, with increasing interest in Bitcoin from both the government and corporations, some people may be wondering if they should buy it. Today, we will look at two concepts you need to know before buying Bitcoin.
Meaning and significance of Bitcoin dominance
Bitcoin dominance refers to the proportion of Bitcoin in the cryptocurrency market. For example, if the total cryptocurrency market capitalization is $2 trillion and Bitcoin's market cap is $1 trillion, then Bitcoin dominance is 50%.
The importance of Bitcoin dominance
This is because Bitcoin dominance affects altcoins. Let's take an example.
If Bitcoin has risen by 4% but altcoins have risen by an average of 1-2%, Bitcoin dominance will rise.
Conversely, when Bitcoin rises by 1%, if altcoins rise by an average of 4-5%, Bitcoin dominance will fall.
For this reason, if Bitcoin dominance is on the rise, it means money is flowing into Bitcoin, indicating a Bitcoin market; conversely, if Bitcoin dominance is falling, it indicates an altcoin market.
Generally, if Bitcoin dominance is over 60%, it is referred to as a Bitcoin market, and investing in Bitcoin at this time may yield better returns. The general pattern of cryptocurrency investment is Bitcoin market > Major coin market > Altcoin market.
As of June, Bitcoin dominance is around 63-64%, so it seems that the bull market many are waiting for may take a bit more time. Some people overly trust Bitcoin dominance, but it is only reference data and not absolute.
You can find many places to view the Bitcoin dominance chart by searching for 'Bitcoin Dominance' on Naver.
Meaning and significance of Bitcoin halving
The Bitcoin network halves its mining reward approximately every four years. The reason is to slow the rate of supply increase to prevent inflation and maintain scarcity. Before 2024, one block mined would yield 6.25 BTC, but now only yields 3.125 BTC per block.
The importance of Bitcoin halving
Historical cycles show that rises typically begin 3-6 months after a Bitcoin halving.
When the mining volume decreases, it naturally leads to a supply shortage, and prices often rise due to market logic and people's psychology mixing. In past Bitcoin halvings, there were increases of over 90 times, so many people are looking forward to the halving.
Why is it difficult to expect the halving effect anymore?
When the halving occurs in 2024, many people are looking forward to it, but it is showing a trend that falls short of expectations. Why is that?
① Change centered around institutional investors
In the past, individual investors led the market, but now ETFs and institutions are leading the funds.
② Insufficient halving effect
While past halvings saw significant decreases in mining volume, this halving's decrease in mining volume is minimal.
③ A fact that everyone knows
It is now common knowledge that Bitcoin rises before and after the halving. This is due to the scheduled event, commonly referred to as king pricing or price pre-reflection.
When looking at Bitcoin prices, various indicators are referenced, but among them, we explored the most basic and important concepts of Bitcoin dominance and halving.
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