BTC dominance is the percentage of the total cryptocurrency market capitalization that Bitcoin takes up at any given point in time.

But… what exactly does this mean?

You have probably seen this percentage while you are on Coinmarketcap:

You may not have given it much attention – or any attention at all – but the percentage of bitcoin dominance can give incredible insight into the cryptocurrency market.

And knowing how to take advantage of this has the potential to earn you big profits.

So, let’s figure out how to do this properly.

BTC Dominance Meaning

Let’s break down the meaning of BTC dominance a little further.

To do this, we need to first understand what market capitalization is.

Total Market Capitalization

In terms of the cryptocurrency market, market capitalization is the total value of all digital assets in circulation at any given time.

This means that this is the value of Bitcoin, Ethereum, Litecoin, EOS, NEO, and all other cryptocurrencies combined.

In the above picture, the market capitalization, or, the total value of all crypto assets in circulation is $384,823,711,638.

And Bitcoin dominance is 37.2%.

What is Bitcoin Dominance In Relation To Total Market Capitalization

This means that the total value of Bitcoin takes up 37.2% of the entire market.

We can prove this by doing the following calculations.

The market capitalization of a single coin is simply its price multiplied by its circulating supply.

This makes sense, as this essentially means that we are calculating the value of all available Bitcoin in the market.

So, taking the example from the above picture:

Market Capitalization Of Coin = Price Of Coin x Circulating Supply Of Coin

Bitcoin Market Capitalization = Price Of Bitcoin x Circulating Supply Of Bitcoin

Bitcoin Market Capitalization = $8,392.56 x 17,026,637

Bitcoin Market Capitalization = $142,980,998,221

This is how we calculate the total value, or, total market capitalization of Bitcoin.

These numbers are already shown on the home page of Coinmarketcap, but it’s important you understand how they all relate.

Hopefully, this page is starting to make more sense to you now.

Now let’s see how we calculate the percentage of Bitcoin dominance in relation to the cryptocurrency market as a whole.

This is done by taking the total market capitalization of the entire market and dividing it by the market capitalization of Bitcoin.

We can use the following calculation:

BTC Dominance = Bitcoin Market Capitalization / Total Market Capitalization

BTC Dominance = $142,980,998,221 / $384,823,711,638

BTC Dominance = 37.15493455754121%

BTC Dominance = 37.2%

Please note that this calculation can be used to see the dominance of ANY cryptocurrency or altcoin in the market.

But for now, we care about Bitcoin dominance.

As you can see, these numbers are also provided on Coinmarketcap’s landing page:

Now you can understand how this page works and what these numbers mean.

In fact, we are just skimming the top here.

Coinmarketcap goes MUCH deeper than this.

If you want to know how to really dig deeper into this tool, you can click here to read how to use Coinmarketcap.

It is a very valuable read with a ton of insight.

With that said, you should now understand the meaning of BTC dominance and how to calculate it.

You should also keep in mind that when you hear the term “Bitcoin dominance index“, it simply means the BTC dominance percentage we just calculated.

But now it’s time to learn how BTC dominance affects the market and what it means when it starts to increase or decrease.

So let’s look at the history of Bitcoin dominance up until this point, and how it has affected markets in the past.

Bitcoin Dominance Graph, Chart & Trends

Take a look at this chart:

This shows the trend of BTC dominance from 2013 to the present in relation to other altcoins.

The graph is pretty easy to read: Bitcoin was dominating the market at about 90% of the total market cap up until 2016, then sharply declined to this day.

And on the opposing end, we can see Ethereum, Bitcoin Cash, Litecoin, Ripple Dash, NEM, Monero, IOTA, NEO, and the rest of the altcoins starting at less than 10% dominance from 2013 – 2016, to now having taken up over 60% of the market if all added together.

Overall Percentage Trend & What This Means For Bitcoin Price

Overall, it looks like Bitcoin is on a consistent downward trending slope.

Although it has been decreasing at an accelerated rate recently, BTC dominance has always been consistently declining each year.

But this doesn’t mean the price of Bitcoin is going down.

In fact, as we all know, Bitcoin went from about $1,000 in January 2017 to about $20,000 in December 2017.

A 20x growth in price.

But at the same time, BTC dominance went from 87.62% in January 2017 to 38.65% in December 2017.

A decrease in market dominance by 48.97%.

Almost 50%.

But how does Bitcoin both 20x in price and decrease by almost 50% in total market capitalization at the same time?!

Let’s find out.

Why is BTC Dominance Losing & Decreasing

By using this BTC dominance chart as an example, we will explore why Bitcoin is behaving the way it is.

By the end of this, you will know exactly where the market is going next and how to capitalize on it.

So, let’s look at the part of this chart where we are losing and decreasing BTC dominance:

First off, why do we lose BTC dominance?

Decreasing dominance simply means that Bitcoin does not take up as much as the market capitalization of the cryptocurrency market as it once did.

And why is this the case?

Because other altcoin capitalizations are rising relative to Bitcoin.

Think of how long Bitcoin has been around – since 2009 when Satoshi Nakamoto founded it.

And since then… over 1600 cryptocurrencies have flooded the market!

With the majority of initial coin offerings (ICOs) being issued in 2017, it makes complete sense why BTC dominance is decreasing.

With more competition, it is only natural for Bitcoin’s stake in the market to decrease.

And we have seen SUBSTANTIAL drops in the market since January 2017.

So this makes sense.

But why did it increase from 37.82% to 65.18% from the summer to the middle of December 2017…

Why Do We See A Gain & Increase In BTC Dominance

Take a look once more:

Here, Bitcoin clearly increases its stake in the market.

Why?

Well, let’s think about this again:

If BTC dominance was decreasing when people were buying all the new altcoins, then why did it starting increasing again?

Because people started selling and converting their altcoins back to Bitcoin!

Do you see what’s happening here?

The market started becoming FLOODED with new money when new coins and tokens were being ICO’d every single day.

It made such a disruption that the media started catching on.

And when that happened, EVERYBODY started talking about it and started accumulating a position.

And I mean literally everyone was talking about Bitcoin when it was rallying and doubling, tripling, quadrupling its value within a week.

It became the talk of the town – a normal conversation in your local barber shop!

Because of the fear of missing out (FOMO) on the gains that they heard stories about on the news, everyone bought in.

And, of course, since the vast majority got their information here, they were aware of pretty much only Bitcoin, since it was the first and biggest cryptocurrency by far; thus, the digital asset that the focus and limelight were on.

And so after Bitcoin dominance originally declined because it had to share the market with the new altcoins, it then increased sharply when the masses began creating addresses and buying solely Bitcoin.

But then something else happened.

How BTC Dominance Affects Altcoins & The Cryptocurrency Market As A Whole

The mentality behind the new money in the market was to make a quick buck and to get rich quick.

Although a lot of people don’t want to hear it, this sentiment is true.

People heard that it was possible to become a millionaire within a year – heck, even a few months! – if they placed the right bets.

And so everyone was sold on this idea and the masses invested.

And when this happened, BTC dominance shot back up – almost doubling from the summer of 2017 to the end of that year.

But what happened next is a trend that you MUST be aware of:

People made their gains, but wanted more.

Investing is an emotional thing to a beginner.

When you turn $1,000 to $20,000 in one year, greed can overcome you.

So what people decided to do was to use their Bitcoin earnings to invest in altcoins.

They figured that if they could leverage their BTC gains by converting their highly-valued Bitcoin to a low or even micro-cap altcoin, said altcoin could explode in price and they could become very, very rich.

Which actually is true if you invest in the right coin.

And so everyone did this.

And so, of course, BTC dominance sharply declined once again, as the people who had Bitcoin sold it off in exchange for another cryptocurrency.

When this happened at the end of 2017 and the beginning of 2018, the price of Bitcoin came down as quickly as it went up because the money that came in to inflate the price was quickly coming out.

And this increased FUD – fear, uncertainty, and doubt.

And so the markets leveled out again, although landing much higher from where it started (from $1,000 to $20,000, back down and leveled around $6,500).

That brings us to today.

How To Take Advantage Of BTC Dominance

Now that we know how BTC dominance affects the markets, how do we take advantage of this knowledge?

Well, there is a way you can profit from this.

In fact, there are multiple ways in which you can profit from this.

Let’s put it all together.

BTC Dominance Is A Repeating Trend

You must understand that the trend I just showed you – what happened in 2017 – is a trend.

This is because, as I said before, investing is an emotional game.

It’s not supposed to be; in fact, it’s supposed to be purely logical.

But humans are emotional creatures.

And the average person who has no exposure to the cryptocurrency market will invest as such.

So this will happen again.

All we need for Bitcoin to rally again is some sort of catalyst to get people and the media talking once more.

This could be a news story, widespread adoption of government entities, large companies issuing their own ICO’s – there are quite a few possibilities.

When this happens, people will buy into Bitcoin again, and the price and dominance will both rise.

Then, when people want to reinvest their gains, they’ll invest in smaller cryptocurrencies.

Which will make Bitcoin dominance decrease and the price to be readjusted once more – yet, at a higher level than before the rally.

Ride Both Waves Of Fluctuation

So, you can profit TWICE off of this knowledge by riding both waves of BTC dominance fluctuation.

The first would be to stock up on Bitcoin while its low.

Ride the wave up until dominance hits around the sweet spot of 55%-65% of total cryptocurrency market capitalization (with the price also increasing with this rise).

Then, with this increased value of Bitcoin at its peak, buy into the altcoins you believe will rally.

When this happens, you’ll have the best bang for your buck as the altcoins will be at their lowest price and Bitcoin will be at its highest.

This gives you the best purchasing power possible.

Then, as the altcoins rise and BTC dominance decreases, you can choose to cash out, HODL, or convert back to Bitcoin when you have made a sufficient amount of profits.

If you time this properly, you can make A LOT of money FAST.

Be One Step Ahead Of Everyone Else

Notice how I said, “if you time this properly.”

There is a lot of luck with this strategy, as you don’t really know exactly when this will happen.

But with the knowledge that this WILL most likely happen, you are MILES ahead of everyone else.

And if you are able to use this knowledge to be one step ahead of the herd, then you, my friend, are laughing straight to the bank.

Here is a great video explaining the importance of bitcoin dominance:

Bitcoin Dominance: Final Thoughts

I know this was a long article, but I hope it served you well.

I had no idea what Bitcoin dominance was or how it worked, and I had no idea how valuable analyzing it could be.

But once I discovered the true value of it, I knew I HAD to share this knowledge.

Just remember that making gains off the fluctuation of BTC dominance is all about timing.

You are armed with the knowledge to now do so, so it is up to you to time the market and invest accordingly.

If you have any other topics you would like me to discuss in-depth, please leave a comment on this article and I will get back to you as soon as possible.

In the meaning time, click around our website and find many other useful resources such as this!

There is something to learn for everyone.