Bitcoin dominance refers to the ratio of Bitcoin’s market capitalization to the total market capitalization of all cryptocurrencies. It is an indicator of how much influence Bitcoin has in the cryptocurrency market.
The calculation of Bitcoin dominance is as follows:Bitcoin Dominance (%) = Bitcoin Market Cap ÷ Total Cryptocurrency Market Cap × 100
A high Bitcoin dominance implies the following:
- Market maturity: Bitcoin is the first and most recognized cryptocurrency. A higher dominance suggests that the market is less mature.
- Market stability: Bitcoin is less volatile and more stable compared to other cryptocurrencies. The higher the dominance, the more stable the overall market is considered to be.
- Investor confidence: Bitcoin is the most trusted cryptocurrency. A higher dominance indicates that investors have more confidence in Bitcoin.
On the other hand, a declining Bitcoin dominance suggests a growing interest in altcoins (cryptocurrencies other than Bitcoin). This may reflect market diversification and expectations for new projects.Bitcoin dominance is one of the essential indicators for understanding the overall trend of the cryptocurrency market. Investors can refer to this indicator when considering the composition of their portfolios.