đ Bitcoin dominance, the ratio of Bitcoinâs market cap to the total cryptocurrency market cap, has been a key indicator for spotting trends in the crypto market. đ Since Bitcoinâs inception in 2009, its dominance has declined due to the rise of thousands of altcoins, but it still remains the largest cryptocurrency. đ
Market cap is calculated by multiplying the total number of tokens in circulation by the current price. Bitcoinâs dominance is then calculated by dividing its market cap by the total crypto market cap. For instance, if Bitcoinâs market cap is $534 billion and the total crypto market is $1.16 trillion, BTCâs dominance stands at 45.8%. đ§ź
Bitcoin dominance is influenced by factors such as Bitcoinâs price action, the rise of altcoins, and the increased usage of stablecoins. Itâs also affected by market cycles, with investors often moving to Bitcoin as a safe haven during bear markets and to riskier altcoins during bullish phases. đ
Bitcoin dominance can be used to spot trends and identify market cycles. For example, if Bitcoinâs price is rising but its dominance is falling, it could signal a bull market for altcoins. Conversely, if both Bitcoinâs price and dominance are falling, it could indicate a bear market. đđ»
However, relying solely on Bitcoin dominance as an investment tool can be risky. The crypto sector is volatile and still in its early stages, so itâs important to use a mix of technical and fundamental analysis. Moreover, the rise of utility altcoins and the potential for Bitcoin dominance to reach new lows could render the index ineffective. đš
Despite this, Bitcoin dominance remains a popular metric and can provide valuable insights into the health of the crypto market. đđ
To dive deeper, check out the complete article: https://droomdroom.com/a-guide-to-bitcoin-dominance/
