Bitcoin Dominance

What Is Bitcoin Dominance and Why Is It Important?

In the world of cryptocurrency, there is one term you’ll often encounter: Bitcoin dominance. But what does this actually mean? Let’s keep it simple. Bitcoin dominance refers to the percentage of the total market value of all cryptocurrencies that is represented by Bitcoin (BTC). It is an important indicator that helps investors understand how Bitcoin is performing compared to other digital coins.

What Does Bitcoin Dominance Tell Us?

Imagine the total value of all cryptocurrencies on the market is €1 trillion. If Bitcoin is worth €600 billion, then Bitcoin dominance would be 60%. A high Bitcoin dominance means that Bitcoin remains the main player in the crypto market. This can give investors a sense of security, as Bitcoin is often considered the “gold standard.”

On the other hand, if Bitcoin dominance is low (for example, below 50%), this may indicate that altcoins (other cryptocurrencies besides Bitcoin) are gaining in popularity. This is interesting for investors who are considering diversification and may want to invest in other coins.

Bitcoin Season vs. Altcoin Season

Now comes the exciting part: the seasons in crypto! Bitcoin dominance can help investors determine whether we are in a Bitcoin season or an altcoin season.

• Bitcoin Season: This is the period when Bitcoin is doing well and Bitcoin dominance is rising. This usually happens when investors have confidence in Bitcoin, often during a bull market. When Bitcoin dominance is above 60%, we commonly refer to this as a Bitcoin season. During this time, Bitcoin’s price can rise dramatically while altcoins get less attention.
• Altcoin season: This is the opposite. During an altcoin season, Bitcoin dominance falls while altcoins gain in popularity. This usually happens when Bitcoin dominance drops below 50%. During this period, investors may take profits from Bitcoin and invest them in smaller cryptocurrencies, causing altcoin prices to surge.

What Can Investors Do?

For investors, it’s important to keep an eye on Bitcoin dominance. A low dominance can be a signal to invest in Bitcoin, while a high dominance may present opportunities to invest in altcoins. It can be a good idea to follow trends and observe fluctuations in Bitcoin dominance to make informed decisions.