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Understanding Bitcoin Dominance
In today's blog I will be talking about Bitcoin Dominance and this is something a lot of people don't know even after being in the crypto market for years and believe me it is not just something which is difficult to understand or learn about, it is very basic, it is very easy and that is why I am going to educate every one of you about Bitcoin Dominance in this blog.
What is Bitcoin Dominance
If we go by the name itself, Bitcoin Dominance means the dominance is being created by Bitcoin in the entire crypto market. So maybe we can say that the percentage of total cryptocurrency market capitalization which is held by Bitcoin is known as Bitcoin Dominance and there is a formula to calculate it which I am going to share below so you can see it.
Bitcoin Dominance = (Bitcoin Market Cap / Total Crypto Market Cap) × 100
Bitcoin Dominance is calculated by dividing Bitcoin market cap by total crypto market cap and then multiplying it by 100.
For example, if the market cap of Bitcoin is 2 trillion and the total crypto market cap is 4 trillion then Bitcoin Dominance will be ( 2 / 4 ) * 100 which is 50%. So in that scenario 50% will be the Bitcoin Dominance level.
Why Bitcoin Dominance is Important
There are many reasons why we have to look at the Bitcoin dominance and the most important out of them is it helps us find the market sentiment. Most people consider that if dominance is above 50 percent then obviously money is flowing more into Bitcoin, but if it is less than 50 percent then the rest of the crypto market is dominating Bitcoin which is good for altcoins as well.
Now, I can't say that it solely helps in predicting the alt season, but yes, it can be one of the factors which is considered when someone is predicting alt season. Alt season comes only when Bitcoin dominance drops significantly and the money starts flowing into the lower market cap coins which are known as altcoins.
And lastly I think the dominance also helps us decide how the investors are investing. If the dominance is high then investors are not in the mood of taking any risk. But if it is falling it means that investors have started to take risk and are investing money in altcoins.
Bitcoin Dominance Key Levels
Now I am going to share the chart from TradingView which I have just drawn and there you can see I have created two levels for Bitcoin dominance. The one is the support level and the other is resistance level. If you are someone who is new to the market and you don't know about resistance and support, I will just tell you the support is the one you see at the bottom, that is the bottom line and the resistance line is the line which you see at the top.
These two levels are very important for Bitcoin dominance. The lower level which is the support has been acting as support for almost more than two years. Since February 2023 and till date we have been traveling within that range and there was only one instance that was last year in the month of November when we broke that support downwards and that was also a time when altcoins started pumping like anything. If you are in the crypto market you might remember that last year in the month of November and December the altcoins reached the peak value for themselves and that was the time when dominance dropped below that support line.
Then in the month of January we reclaimed that support which was actually the resistance for dominance at that moment and then we started consolidating in between those two levels once again and altcoins crashed massively.
What is Next for Bitcoin Dominance
Now you can see that we have once again broke down that support and this is where we might see an alt movement once again if we go downwards. But if the dominant support which is right now the resistance is once again claimed then Bitcoin will go higher and altcoins will bleed further.
It is very important to look at this level right now which you can see in the screenshot below as well and that will help you understand what the market will do in the coming weeks and months.
I don't know if the alt season that we used to see initially will actually arrive. But if we want to make sure that alt season comes, the dominance should drop at least by 7-10%. Only then we can see a massive pump in altcoins. If the dominance is not going down by 7-10% then there will be a movement in altcoins, but it will not be as big as expected.
Conclusion
So I would like to conclude this blog now and say that we have learned about Bitcoin dominance, even if it is basic. You now know how the bitcoin dominance is calculated and not only that, the formula can be used anywhere for any token if you want. You also know why Bitcoin dominance is important and you also know two major levels that are very important to understand how the market will perform in coming months.
For the Altcoin lovers and Alt season gang, you now know when it might come, we discussed it already and I hope you learnt something from my blog. Feel free to ask any question you have in mind related to this blog.
Thank You and Happy trading everyone.
