What is bitcoin dominance and why does it matter?

Bitcoin dominance is the share of the total cryptocurrency market's value that belongs to bitcoin. It is calculated by dividing bitcoin's market capitalization by the combined market capitalization of all cryptocurrencies. Traders follow bitcoin dominance because it shows whether money is concentrating in bitcoin or spreading out into other coins.

How is bitcoin dominance calculated?

The formula uses market cap, which is a coin's price multiplied by the number of coins in circulation. Bitcoin's market cap goes on top, and the total crypto market cap goes on the bottom. The result is multiplied by 100 to give a percentage.

The answer depends on what counts as "the total market." CoinGecko divides by its global crypto market cap, and its market share breakdown lists stablecoins as a separate slice of that total. TradingView's ticker, written CRYPTOCAP:BTC.D and often searched as "btc.d tradingview," divides by the combined market cap of the top 125 coins. That is why the figure for bitcoin dominance today can differ slightly from one site to another.

Why does bitcoin dominance matter?

Bitcoin dominance is used as a rough guide to risk appetite. CoinMarketCap Academy says dominance tends to rise in bear markets, when investors look for relative safety, and to fall in bull markets, when smaller coins draw more interest.

It is also tied to the idea of altcoin season, a period when many altcoins outperform bitcoin. A falling dominance figure is often read as a sign that such a period may be under way. CoinMarketCap Academy describes a common pairing: if bitcoin's price and dominance both rise, bitcoin is leading, while a rising price with falling dominance points to altcoins doing better.

What does the bitcoin dominance chart show over time?

A bitcoin dominance chart shows how the share has shifted. Bitcoin was the only cryptocurrency when it launched in 2009, so its share started near 100 percent. Gemini says dominance stayed above 90 percent for most of the early years. During the 2017 initial coin offering boom, it fell to about 37 percent, according to both Gemini and CoinMarketCap Academy. CoinMarketCap Academy also notes a peak of roughly 72 percent in January 2021.

What is bitcoin dominance excluding stablecoins?

Stablecoins such as USDT and USDC are designed to hold a steady value, usually one dollar. When large amounts are issued, they add to the total market cap and push bitcoin's share down, even if no money has moved out of bitcoin. To correct for this, some traders publish versions of bitcoin dominance excluding stablecoins. One such TradingView indicator removes USDT and USDC from the total to show bitcoin's share of the non-stable market.

What are the limits of bitcoin dominance?

Gemini and CoinMarketCap Academy both point to weaknesses. Thousands of new tokens keep entering the market, which pulls dominance down over time regardless of demand for bitcoin. Market cap assumes every token could be sold at the current price, which is often not true for thinly traded coins. Meme coin surges can cause sharp swings that quickly reverse. The figure is best read as one signal among many.

Crypto prices are volatile and a token can lose most of its value.