In the crypto world, Bitcoin stands out not only for being the first, but also for its dominance over the market. This is where the question “What is Bitcoin dominance?” comes into play. Bitcoin dominance is a critical indicator of how strong Bitcoin is compared to other cryptocurrencies. While this ratio helps investors better understand market trends, it also becomes an important indicator for those who want to keep their finger on the pulse of the crypto world. In this content, which we have prepared as a guide specific to Bitcoin dominance, we will be answering many questions.
What Does Bitcoin Dominance Mean?
In fact, dominance in the cryptocurrency market is a general concept and refers to the ratio of the market capitalization of a cryptocurrency to the value of the overall cryptocurrency market. Now that we’ve briefly outlined this term, let’s start to discuss the question “what is Bitcoin dominance” in detail.
The fact that Bitcoin was the first cryptocurrency allows it to stand ahead of all cryptocurrencies and lead them. When you think about it, the market cap of any cryptocurrency is not close to Bitcoin. Bitcoin’s closest competitor in terms of market capitalization is Ethereum, and although this is the case, the difference between BTC and ETC is quite large. Today, if we were to ask anyone around us, “What is the first cryptocurrency that comes to mind?”, the answer we would get would most likely be “Bitcoin”. When all these are put together, we come across the concept of Bitcoin dominance.
Bitcoin dominance, in its simplest form, is a data that expresses the dominance of Bitcoin against all kinds of cryptocurrencies. Looking at this data, Bitcoin’s dominance in the market can be clearly seen. This term is also known to be used as “Bitcoin dominance” or “Bitcoin dominance” in the cryptocurrency markets.
Now that we’ve answered the question “what does Bitcoin dominance mean”, let’s start sharing details about this concept.
How Does Bitcoin Dominance Rise or Fall?
The increase in the trading volume as more users invest in Bitcoin and the higher demand for BTC against altcoins to support this can be shown as the two main reasons that cause Bitcoin’s dominance in the market to increase.
What has been seen so far is that Bitcoin has largely dominated the cryptocurrency market. A strong reason for this is that users shift their investments in cryptocurrency assets, which they will consider risky at that moment, to Bitcoin. The fact that all of these transactions take place in the opposite way is also the question “How does Bitcoin dominance fall?” can be the answer to the question.
The following equation can be used to calculate Bitcoin dominance:
Bitcoin Percentage Market Cap Ratio ÷ Total Crypto Market Cap Ratio = Bitcoin Dominance
What Happens If Bitcoin Dominance Rises?
When Bitcoin’s dominance over the market increases, it is observed that investors are largely turning to Bitcoin and moving away from altcoins. In this case, there may be a decline in the demand and price of altcoins. Bitcoin’s growing dominance is often associated with investors’ search for a safe haven; Especially during periods of market uncertainty or high volatility, investors turn to Bitcoin, which is seen as more stable and reliable. As a result, an increase in Bitcoin’s market share could lead to a stagnation or loss of value in the altcoin market.
What Happens If Bitcoin Dominance Falls?
Investors’ turn to altcoins could lead to a decline in Bitcoin’s dominance over the market. This can lead to significant increases in the price of altcoins. While it is possible for Bitcoin to see an increase in price even when market dominance is low, this is a rarer scenario. The fact that investors prefer altcoins instead of Bitcoin may create a strong movement in the altcoin market.
Bitcoin Dominance and Its Impact on Altcoins
There are a lot of cryptocurrencies on the market, and this number continues to grow rapidly every day. Although this is the case, it seems unlikely that Bitcoin will be surpassed in terms of market capitalization. However, the development of the cryptocurrency industry and the increasing number of altcoins may affect the Bitcoin dominance rate.
What Factors Are Bitcoin Dominance Influenced By?
One of the main factors influencing Bitcoin’s increasing market dominance is that it attracts more investors and therefore more demand than other cryptocurrencies. In the face of this situation, the trading volume in Bitcoin increases and the price rises. It would not be wrong to say that the cryptocurrency market is largely driven by Bitcoin. Things that have led to Bitcoin’s increasing dominance; It can be explained by the high demand of investors and the fact that investors abandon their investments in cryptocurrencies that are low in volume and relatively high in terms of risk and prefer Bitcoin.
During periods of high Bitcoin market dominance, price changes on the Bitcoin side affect all cryptocurrencies. Looking at previous data, a decline in the price of Bitcoin at a time when Bitcoin market dominance is high can significantly bring down prices in other cryptocurrencies. Due to Bitcoin’s dominance in the market, downward price movements in Bitcoin are highly likely to increase the depth of the decline in other cryptocurrencies.
The value of Bitcoin dominance changes frequently. Bitcoin’s dominance was over 96% in 2013. The fact that Ethereum became popular in 2017 and was highly preferred by investors caused a sharp decline in Bitcoin’s market dominance. This rate fell from 87% in January to 37% within six months, resulting in one of the lowest dominance rates in Bitcoin’s history. On June 19, 2016, Ethereum’s market dominance was 32%, while Bitcoin’s dominance rate was 37%.
Other important factors affecting Bitcoin dominance are basically as follows:
- Balance of Demand and Supply: Bitcoin’s price varies depending on the balance of supply and demand. When demand increases, the price rises, while when demand decreases, the price decreases.
- Adoption and Usage: The more widely Bitcoin is used by individuals and institutions, the greater its dominance in the market.
- Investor Interest: Bitcoin is heavily influenced by investor interest. The demand for Bitcoin depends on factors such as investors’ price expectations, security concerns, market sentiment, etc.
- Technical Superiority: Bitcoin has a well-established and secure technological infrastructure that cannot be counterfeited by other cryptocurrencies. This makes it unique and supports its leadership in the market
- Regulations: Governments and financial institutions may impose regulations on digital assets such as Bitcoin. Regulations can affect the adoption, adoption, and price of Bitcoin. For example, if Bitcoin is banned or restricted by a country, this could have a negative impact on its price.
- Security and Technology Development: Security breaches, theft, or hacks can reduce trust in Bitcoin and affect the price. Likewise, advances in Bitcoin technology, innovations and improvements that will address scalability issues can have a positive impact on the price by increasing the usability of Bitcoin.
- Global Economic Situation and Geopolitical Factors: Bitcoin may experience price fluctuations in connection with the global economic situation and geopolitical events. For example, during times of economic uncertainty or financial crises, investors may turn to Bitcoin as a safe haven, which can drive up the price. Furthermore, geopolitical factors, such as trade tensions between countries, political conflicts, or changes in economic policies, can also affect the price of Bitcoin.
- Market Cap: Bitcoin has the highest market cap in the cryptocurrency markets, making it a leading role on the scene.
Each of these factors can affect Bitcoin’s dominance and cause price fluctuations. Due to Bitcoin’s volatile nature, it is difficult to predict future price movements, and Bitcoin is tied to a complex ecosystem made up of a combination of many different factors.
How Does Bitcoin Dominance Affect the Market?
During periods when other cryptocurrencies in the market come to the fore and become more popular, sharp declines can be seen in Bitcoin’s market dominance. Periods of increased altcoin dominance and trading volumes, and less demand for Bitcoin are called “altcoin season“. Although market dominance data alone is not enough for investors to determine their buying and selling strategies, it can provide insight into the future of the market.
Where to View the Bitcoin Dominance Chart?
Bitcoin dominance data is not fixed and can change at any time or second. If Bitcoin dominance data is taken into account in trading transactions, this data should be followed up-to-date. For the current Bitcoin dominance chart, you can visit the websites of data providers such as TradingView and CoinMarketCap.
