How to Trade Crypto Using BTC Dominance? BTC dominance can directly impact altcoins by presenting the market’s trading volume in BTC against altcoins. According to market valuation and trading volume, Bitcoin (BTC) is the first and most important cryptocurrency globally, ranking first and second. Given that all cryptocurrencies are traded against Bitcoin and that Bitcoin’s dominance might serve as a beneficial signal when trading various cryptocurrencies, these considerations are crucial.
This essay aims to provide insight into how to trade cryptocurrencies while employing the BTC dominance indicator and how to interpret the overall Bitcoin dominance index chart.
What is the BTC dominance chart?
The dominance of Bitcoin in the cryptocurrency market can be determined by comparing the market capitalization of Bitcoin to the total market capitalization of all cryptocurrencies. In other words, the bigger Bitcoin’s market capitalization, the greater the degree to which BTC domination is in play, and we now know how much Bitcoin makes up what proportion of the cryptocurrency industry.
The BTC dominance Trading View chart displays these figures in a straightforward percentage format, allowing users to quickly determine if BTC dominance is at 40 percent or 60 percent.
However, the Real Bitcoin Dominance Index assesses BTC dominance solely against proof-of-work (Pow) currencies attempting to become a form of money.
Since many altcoins, such as Stablecoins, are not intended to compete with Bitcoin, the Real Bitcoin Dominance Index may provide a more accurate long-term picture of Bitcoin’s dominance in the cryptocurrency market.
According to the developers, this indication also allows users to remove Ethereum since it is controversial whether or not Ether (ETH) is intended to be money rather than a utility token.
How does BTC dominance affect altcoins?
BTC dominance can directly affect altcoins, as it will show the trading volume of altcoins relative to the market trading volume of BTC.
Generally speaking, if Bitcoin dominance increases, traders advocate that one invests a greater proportion of one’s cryptocurrency holdings in BTC rather than in altcoins. If Bitcoin’s dominance is waning, dealers urge that investors own a greater number of other cryptocurrencies than they do Bitcoin.
The dominance of Bitcoin is not a perfect reflection of a bear or bull market, but there are some parallels between the two concepts. For example, bull markets may decrease BTC supremacy since money is often flooding into other cryptocurrencies at such times. When markets are downturn, traders may be more likely to shift their cash out of altcoins and into Bitcoin, which is considered a more trustworthy asset.
Some cryptocurrency enthusiasts may argue that the decline in Bitcoin’s dominance is a positive development because it indicates the expansion of the crypto market. Funds flow through various projects instead of just bitcoin. However, it is important to remember that total crypto market capitalization will include pre-mined and forked coins, which means that the number of altcoins can inflate artificially.
It is also important to remember that the dominance of Bitcoin can decline even when the value of the asset increases. It can happen when much money flows into the cryptocurrency market, including Bitcoin. However, more money may be flowing into altcoins than the world’s largest cryptocurrency.
The point is that while Bitcoin’s Dominance may appear to paint a certain picture of the cryptocurrency market on the surface, there are numerous factors to consider to form an informed opinion. May reduced Dominance due to an altcoin boom that will last only a short period, while the entire market may be losing money. Whenever possible, it is preferable to do further research before making an investment choice.
How to trade Bitcoin dominance?
When seeking to trade Bitcoin dominance, there are several considerations to consider. First and foremost, it is important to recognize that Bitcoin’s supremacy may be eroded if there is significant interest in even one other cryptocurrency. This heightened interest in a particular cryptocurrency does not imply that all altcoins will have rising trends shortly. The market may need some time to adjust itself.
When evaluating certain famous cryptocurrencies, it is also important to assess their intentions and whether or not those intentions will convert into a long-term influence on the altcoin market. For example, we may see Stablecoin have a huge increase in volume for the time being, as seen in the chart below.
Also, users may buy a Stablecoin solely to transfer their cash to Bitcoin since Stablecoins may be a convenient method to onboard funds into the cryptocurrency market.
As a consequence of this activity, Bitcoin’s dominance may suddenly decline and return, negatively influencing short-term trading. Another reason contributing to unforeseen short-term declines or increases in Bitcoin dominance is the fear of losing out on a lucrative investment opportunity (FOMO).
Every day, new currencies are introduced to the cryptocurrency market. A significant amount of excitement is generated by some of these new altcoins entering the market, resulting in hundreds of millions of dollars moving into the altcoin side of things and a significant reduction in Bitcoin’s market dominance.
What happens When Bitcoin Dips?
As people withdraw cash from Bitcoin and other cryptocurrencies, the declining value of Bitcoin may signal a decline in dominance. Still, a price decline may have nothing to do with dominance. If Bitcoin’s dominance begins to wane, consumers should almost surely anticipate an altcoin bull run, and they may prepare to trade appropriately.
However, if consumers withdraw cash from all cryptocurrencies, the price of Bitcoin may fall, causing the total market value of all cryptocurrencies to decline. In this situation, the dominance of Bitcoin can maintain a certain proportion of market share, despite the prospect of a potentially good market for traders.
A BTC dominance chart can show full statistics. It is an important reminder that the dominance of Bitcoin should not be the only tool of a trader’s settlement but should be considered before deciding whether to proceed with the transaction.
Bitcoin crash impact on the crypto market
Leaving aside the issue of dominance, a major decline in the value of Bitcoin has typically resulted in a general market decline, with just a few notable exceptions. A market collapse and Bitcoin are inextricably linked because Bitcoin was the world’s first cryptocurrency and is the benchmark against which all other cryptocurrencies trade.
Look at it this way: If a government contemplates banning Bitcoin, and the cryptocurrency price declines dramatically, traders and speculators may lose faith in altcoins and may pull their money from these alternative assets.
A fall in bitcoin does not inevitably imply a crash in the broader market. The price of Bitcoin has dropped significantly many times, while the price of Ether has remained quite steady. Please keep in mind that various assets have distinct functions, and the downturn of one asset may not be correlated with the downfall.
As time progresses and other cryptocurrencies gain acceptance in the general public’s mind, subsequent Bitcoin collapses may have less and less impact on the entire market. Bitcoin’s supremacy is important right now since it is still the most popular cryptocurrency in the world, according to CoinMarketCap. If rival currencies use Bitcoin’s slogan against it, dominance will become less important.
