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Get to Know What Is Bitcoin Dominance in Crypto

Get to Know What Is Bitcoin Dominance in Crypto

In the crypto market, it is known as Bitcoin Dominance or Bitcoin dominance, so what is Bitcoin domination? In more detail, Bitcoin dominance is a percentage value which is calculated based on the current Bitcoin market cap divided by the global crypto market cap.

Reporting from the crypto exchange site Crypto.com, Tuesday (18/4/2023), for example, Bitcoin’s market capitalization is USD 539 billion or the equivalent of IDR 8,009 trillion (assuming an exchange rate of IDR 14,859 per US dollar), while global crypto market capitalization is USD 1 .16 trillion or the equivalent of Rp. 17,236 trillion.

Dividing USD 539 billion by USD 1.16 trillion equals 46 percent, this is the share of the crypto market cap that is in Bitcoin. Meaning that bitcoin dominates the crypto market by 46 percent.

How Crypto Investors Use Bitcoin’s Dominance

This ratio comes from Bitcoin’s relationship with other crypto markets. It serves as a metric that crypto traders or investors can use to get a pulse on the market, manage risk, and help spot possible trends and trading opportunities, usually in conjunction with other data sets.

Looking at historical data, most crypto markets generally follow the shape and direction that Bitcoin is taking. Since Bitcoin dominates a large part of the overall crypto market capitalization, it has historically been highly and positively correlated with the majority of altcoins, which then react strongly to their price movements.

With this correlation, some argue Bitcoin dominance can also help in understanding trends in the altcoin market.

When Does Bitcoin Dominance Change?

To understand what influenced the change in Bitcoin’s dominance, let’s take a look at the two factors that make up the ratio namely Bitcoin market cap and global crypto market cap.

Since the number of bitcoins in circulation will not increase significantly in a short period of time, the price of Bitcoin is considered to have a greater influence on its market capitalization than the number of coins in circulation.

There are only about 1.7 million bitcoins left to be mined. Historically, as the price of Bitcoin has increased over time, there has been a tendency for its market share to increase proportionally. But as new advances and innovations in altcoins have come into play, this trend of Bitcoin dominance may not last long term.

Bitcoin market cap is only one part of the equation. While there is no exact science to it, other factors can also influence Bitcoin’s dominance, such as altcoin market activity and market conditions which can ultimately impact the total crypto market cap.

Bitcoin Dominance Could Drop

Bitcoin dominance may face a steady decline as the number of altcoins grows and the crypto market diversifies over time. However, depending on the performance of the altcoin market as a whole, Bitcoin’s dominance may fluctuate over time. It is these intermediate changes and fluctuations that are of interest to traders because they can act as indicators regarding the current phase of the market, which can help traders to decide, when looking at a number of different metrics, how they want to position accordingly.

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