What is Bitcoin Dominance and Why Does it Matter?

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Bitcoin dominance is something that is frequently mentioned by traders, but is not something that many new to the space understand or know how to use. This article explains both these things, allowing you to get a better understanding of what Bitcoin dominance is and how it can help your crypto investment strategy.

What is Bitcoin Dominance?

Bitcoin dominance reflects how much of the total cryptocurrency market cap belongs to Bitcoin compared to other coins in the market – essentially Bitcoin’s market share. For many years Bitcoin was the only coin in the market, or at least one of very few, meaning that its dominance was near enough 100%.

With the rise in popularity of alt coins however, mainly due to their potential for vastly higher returns over Bitcoin, Bitcoin has seen its dominance chipped away over the years, as the following graphic illustrates:

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Changes in Bitcoin dominance give us a great insight into the potential behavior of Bitcoin and alt coins during a cycle. Using 2017 as an example, Bitcoin began to lose its dominance at the start of the year as Ethereum and XRP picked up momentum as buyers swapped Bitcoin for faster moving alt coins. With Bitcoin dominance dropping fast, it was clear that the trend was favouring alt coins.

The cycle repeated during the second half of 2017, with those who were following the Bitcoin dominance charts able to plan when to swap between Bitcoin and alt coins. It is even possible to follow the Bitcoin dominance on a more micro level to observe smaller changes, with the following example showing that Bitcoin dominance on a daily timeframe has fallen through a 6-day upward channel, suggesting that alts might be about to stage a comeback:


A New Alt Cycle?

Following a two-year surge from Bitcoin which has seen its dominance more than double, we can see that the Bitcoin dominance has taken a hit in the past two months after topping out twice around the 70% mark:

dominance 2

This suggests that Bitcoin has found its new upper level, some 15% lower than 2017’s high, and that, as we have seen this year, alts have bounced back, causing the Bitcoin dominance to drop.

From having this knowledge, traders and investors are able to have a clearer idea of where the market may be headed in terms of alts coins vs Bitcoin, allowing them to change their holdings appropriately.

Bitcoin Dominance – an Underused Tool

Hopefully now you have a better understanding of Bitcoin dominance, what it is, and how using it can help you identify trends in Bitcoin vs alt coins swings. Like any technical analysis tools it cannot predict the future, but it can identify when the trend is about to change, which can be a very useful tool to have in your back pocket in a bull market.