Bitcoin Dominance (BTCD)
Bitcoin dominance (BTCD) is the ratio between the market capitalization of Bitcoin to every other cryptocurrency. This equation gives information about the trends in the cryptocurrency market. Furthermore, BTCD was highest when Bitcoin had few competitors. However, because of alternative coins and token standards such as Ethereum and ERC-20, Bitcoin dominance got significantly lower compared to 2013. BTCD can be tracked from investing websites such as TradingView.com.
Which Factors Affect Bitcoin Dominance?
Bitcoin dominance is calculated by dividing the bitcoin market capitalization by the total cryptocurrency market capitalization. Therefore, in the equation, two factors affect Bitcoin dominance:
- Total cryptocurrency market capitalization or total cryptocurrency market cap: The total value of all cryptocurrencies has been mined so far. It is calculated for every coin by first multiplying the number of specific coins mined with the price of that particular coin. Then with the addition of all of the coins gives the total value.
- The market capitalization of Bitcoin: It is the value of the mined Bitcoins so far. This market cap of Bitcoin is the multiplication of the number of Bitcoin by the total price of one Bitcoin.
How to use the Bitcoin Dominance Information?
Bitcoin Dominance is not enough to make inferences because it is the ratio of two markets but not their actual value. Nevertheless, traders can use BTCD to observe trends in the crypto market. There are many interpretations of the current cryptocurrency market when it comes to the value of Bitcoin dominance. However, there are four possible scenarios for the general equation of Bitcoin Dominance.
- Increasing BTCD with increasing Bitcoin value means that Bitcoin is increasing its value more compared to the altcoins.
- Increasing BTCD with decreasing Bitcoin value means that altcoins are losing value more than Bitcoin value.
- Decreasing BTCD with decreasing Bitcoin value means that altcoins are losing their value more than Bitcoin value.
- Decreasing BTCD with increasing Bitcoin value may mean altcoins are increasing their value more than Bitcoin value.
