As interest in Bitcoin grows from governments to corporations, some of you might be wondering, “Should I buy some too?” Today, we’ll cover two essential concepts you should understand before buying Bitcoin.
What is Bitcoin Dominance?
Bitcoin dominance refers to the proportion of the total cryptocurrency market that is made up by Bitcoin. For example, if the total crypto market cap is $2 trillion and Bitcoin’s market cap is $1 trillion, Bitcoin dominance would be 50%.
Why is Bitcoin Dominance Important?
Because Bitcoin dominance affects altcoins. Here’s how:
If Bitcoin rises by 4%, but altcoins rise by only 1–2% on average, Bitcoin dominance increases.
On the other hand, if Bitcoin rises by 1%, and altcoins rise by 4–5%, Bitcoin dominance decreases.
This is why a rising Bitcoin dominance means funds are flowing into Bitcoin—often referred to as a “Bitcoin season.” Conversely, falling dominance suggests that altcoins are gaining traction, signaling an “altcoin season.”
Generally, when Bitcoin dominance exceeds 60%, it is considered a Bitcoin season. During this time, investing in Bitcoin may yield better returns. The typical crypto investment cycle follows the order: Bitcoin season → Major coin season → Altcoin season.
As of June, Bitcoin dominance hovers around 63–64%, so the bull market that many are waiting for may take a bit more time. Some investors overly rely on Bitcoin dominance, but it should be used as a reference, not an absolute indicator.
What is the Bitcoin Halving?
The Bitcoin network cuts mining rewards in half roughly every four years. The purpose is to slow down the rate of supply increase, control inflation, and preserve scarcity. Before 2024, miners earned 6.25 BTC per block. Now, they earn only 3.125 BTC per block.
Why is the Halving Important?
Historically, Bitcoin has shown a pattern of beginning price rallies 3–6 months after a halving.
As mining rewards decrease, supply naturally tightens, and when combined with investor psychology, prices tend to rise. In past halving events, Bitcoin prices increased up to 90 times, which is why many investors are optimistic.
Why the Halving May Have Less Impact Now
Many were hopeful for the 2024 halving, but the results have been underwhelming. Why?
Shift Toward Institutional Investors
Previously, retail investors led the market. Now, ETFs and institutions are the main players.
Minimal Impact of the Halving
Earlier halvings significantly cut mining rewards, but this one had a smaller effect.
Everyone Knows About It
The idea that Bitcoin rises around halving is now common knowledge. Since it’s a scheduled event, the impact tends to be priced in early.
While many indicators can be used to analyze Bitcoin’s price, Bitcoin dominance and halving are two of the most basic and important ones.
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