You may have often heard about Bitcoin’s dominance in the cryptocurrency world, but what about the power of altcoins? Altcoin dominance, or the share of altcoins in the total crypto market, is an important measurement that shows how altcoins stand against Bitcoin. So why is this ratio so important? How does Bitcoin’s rise and fall affect altcoins? What does it mean for investors? If you want to better understand the dynamics of the crypto market and discover the power of altcoins, you can continue reading this article where we will discuss the question of what altcoin dominance is in detail.
What is Altcoin Dominance and How is It Calculated?
In the cryptocurrency market, altcoin dominance refers to the percentage of the total market value of all cryptocurrencies other than Bitcoin in the overall market value. In other words, it is a ratio that shows how strong altcoins are against Bitcoin. In addition, it is seen that this concept is used as the dominance in Turkish.
Altcoin dominance calculation is actually quite simple. First, the total value of the entire cryptocurrency market is determined. Then, the market value of Bitcoin is subtracted from this total and the market value of the remaining altcoins is found. Finally, the total market value of altcoins is divided by the overall market value and expressed as a percentage.
For example, if the total value of the crypto asset market is $2 trillion and the market value of Bitcoin is $1.2 trillion, the total value of altcoins is $800 billion. In this case, the altcoin dominance calculation can be done with the following formula:
($800 billion / $2 trillion) × 100 = %40
This ratio obtained with the altcoin calculation formula above helps understand how strong altcoins are compared to Bitcoin. If the dominance is increasing, it means that interest in altcoins is increasing. Conversely, if it is decreasing, investors may be turning to Bitcoin. Altcoin dominance can be considered an important indicator that is frequently followed to understand the general trends of the market.
If you want to get information about Bitcoin dominance, which is another indicator as important as altcoin dominance, you may be interested in: What is Bitcoin Dominance
How Does Altcoin Dominance Rise?
The rise in altcoin dominance means that altcoins have gained more value compared to Bitcoin in the cryptocurrency market. This can happen in a few different ways:
First of all, an increase in altcoin prices is one of the most important factors that increase altcoin dominance. If investors show great interest in certain altcoins and their prices increase rapidly, the total market value of altcoins increases. This causes the dominance rates to change in favor of altcoins.
Conversely, a decrease in Bitcoin can also lead to an increase in altcoin dominance. If altcoins remain stable or lose less value while Bitcoin loses value, the altcoin ratio in the total crypto market value increases. This can accelerate as investors move away from Bitcoin and into altcoins.
Another important factor is the start of altcoin seasons. Altcoin seasons are periods when altcoins experience large price increases during periods when Bitcoin is stagnant or moving sideways. In this process, investors start to turn to different projects instead of Bitcoin and many altcoins gain value.
The shift of investor interest to altcoins is an important factor that increases altcoin dominance. The announcement of new projects, developments in areas such as decentralized finance (DeFi) and NFT or the popularity of certain altcoins may cause investors to invest in these projects instead of Bitcoin.
How Does Altcoin Dominance Fall?
The fall of altcoin dominance is a sign that Bitcoin’s dominance over the market increases. This situation usually occurs due to several fundamental factors.
First of all, an increase in the price of Bitcoin can cause altcoin dominance to decrease. If Bitcoin enters a strong uptrend, a large portion of investors will exit altcoins and turn to Bitcoin. This increases Bitcoin’s market value while decreasing the share of altcoins in the total crypto market.
In addition, a decrease in altcoin prices can also decrease altcoin dominance. If there is a general sell-off in the altcoin market or if confidence in certain projects decreases, the market value of altcoins may decrease. In the event of such developments, Bitcoin’s share in the total market will increase even more.
The return of crypto investors to Bitcoin is also an important factor. In times of uncertainty in the market or when investors are looking for a safe haven, Bitcoin is seen as a more reliable option compared to altcoins. Therefore, investors may sell risky altcoins and move their assets to Bitcoin.
A decrease in interest in altcoins may also lead to a decrease in altcoin dominance. If new projects do not attract enough attention and excitement in areas such as decentralized finance (DeFi) and NFTs decreases, investors’ demand for altcoins may decrease. Thus, Bitcoin’s market dominance is strengthened again and the altcoin dominance level declines.
What is the Relationship Between Altcoin Dominance and the Crypto Market?
The relationship between altcoin dominance and the cryptocurrency market is shaped by the interaction of Bitcoin and altcoins. Market cycles, investor preferences, and Bitcoin’s market movements directly affect altcoin dominance.
First of all, Bitcoin and altcoin dominance are inversely proportional. When Bitcoin dominance increases, altcoin dominance decreases. This is because investors exit altcoins and turn to Bitcoin. Especially during periods when the market is uncertain or Bitcoin experiences a strong rise, investors prefer Bitcoin as a safe haven.
In contrast, an increase in altcoin dominance indicates that investors are turning to altcoins instead of Bitcoin. Generally, when altcoin seasons (altseasons) begin, altcoins experience greater price increases compared to Bitcoin. During this period, investors can exit Bitcoin and invest in altcoin projects in order to achieve higher profits.
Market cycles have a significant effect on the dominance. In bull markets, that is, periods when cryptocurrencies generally rise, altcoins can gain more value and increase their dominance rates. In bear markets, investors may generally turn to Bitcoin to take less risk. Such a situation also indicates a decrease in altcoin dominance.
Changing investor preferences are directly related to altcoin dominance. Developments in areas such as new blockchain projects, DeFi, NFT, metaverse and the like may increase interest in altcoins. However, regulatory developments, major market corrections or macroeconomic uncertainties may direct investors back to Bitcoin.
What is the Connection Between Altcoin Dominance and Crypto Investors?
The dominance is a very strong indicator that has the potential to influence the market trends and strategies of crypto investors. This ratio, which shows the strength of altcoins compared to Bitcoin’s dominance in the market, plays a decisive role in investors’ risk-taking tendencies and portfolio management decisions.
First of all, an increase in altcoin dominance indicates that investors’ risk appetite has increased. During these periods, investors turn to altcoins with higher earning potential instead of Bitcoin. New projects, developments in areas such as decentralized finance (DeFi), NFT and metaverse may increase interest in altcoins. However, altcoins are more volatile than Bitcoin, so they can offer high-profit opportunities but also cause big losses.
On the other hand, the decline in altcoin dominance is a sign that investors prefer Bitcoin as a safe haven. Especially when market uncertainty increases or major declines occur, investors can shift their assets to Bitcoin to take less risk.
Altcoin portfolio management is closely related to how investors react to changes in the market. Investors try to understand trends in the market by following the the dominance rate and can shape their portfolios accordingly. For example, when the dominance increases, they can increase their altcoin investments by taking more risk. However, when dominance falls, they can create a more balanced portfolio by increasing their Bitcoin weight.
As a result, it can be said that there is a strong connection between altcoin dominance and investor decisions. By following this ratio, investors can analyze in which direction the market is moving and manage their risks accordingly. In order to create a sound investment strategy, it is important to carefully monitor the market dominance of both Bitcoin and altcoins.
What are the Factors Affecting Altcoin Dominance?
Dominance indicates the market dominance of altcoins compared to Bitcoin and is affected by several key factors:
- Bitcoin Power: Bitcoin’s rise decreases altcoin dominance, while its fall increases the tendency towards altcoins.
- Altcoin Seasons: Altcoin dominance increases during periods when investors’ interest in altcoins increases.
- Market Cycles: Altcoins gain more value in a bull market, while a return to Bitcoin occurs in a bear market.
- Risk Appetite: Confidence environment investors while they are attracted to altcoins, uncertainty causes them to turn to Bitcoin.
- News and Regulations: Positive or negative developments in the crypto market can directly affect altcoin dominance.
- Technological Development of Altcoins: Innovations in areas such as new blockchain projects, DeFi, NFT, metaverse and the like can increase the interest in altcoins.
- Global Economic Factors: Inflation, interest rates and economic crises can affect altcoin dominance by changing investors’ risk appetite.
Following these factors is important to understand market trends and make the right investment decisions.
Investment Strategies Related to Altcoin Dominance
Applying the right strategies when investing in altcoins is important to reduce risks and increase profits. Here are some basic strategies:
- Altcoin and Bitcoin Portfolio Balance: If Bitcoin is considered a safer investment tool compared to altcoins, the ratio of altcoins in the portfolio can be adjusted according to the market. A balanced portfolio should be created considering the volatility of altcoins.
- Strategies for Altcoin Seasons: Altcoin seasons are periods when altcoins gain value faster than Bitcoin. It may be useful to turn to altcoins during this period, but it is necessary to follow these seasons with the right analysis.
- Being Cautious Against Uncertainties in the Market: Since altcoins have high volatility, caution should be exercised instead of taking risks in uncertain market conditions. Losses that may occur can be limited with strategies such as stop-loss.
- Following Technological Developments: The values of altcoins may increase depending on technological innovations. Following potential projects and updates can help investors make the right moves.
Considering these strategies can help you act more consciously in the altcoin market and make successful investments.
The Future of Altcoin Dominance
The role of altcoins in the crypto market may become even stronger in the future. Innovations in areas such as decentralized finance (DeFi) and NFTs in particular can allow altcoins to gain value and expand their usage areas. While DeFi projects can offer more opportunities to investors, NFTs can increase the buying and selling of digital art and collectibles.
These developments can increase interest in altcoins and increase dominance in the market. Additionally, advances in blockchain technologies could also increase the potential of altcoins. Altcoins with features such as fast transaction confirmations, low transaction fees, and scalability could see greater adoption in the future.
