BTC Dominance: Understanding the Underlying Encryption of the Crypto Market

Have you ever wondered why BTC rises by 15% overnight while alts remain completely still? Why do small coins often experience a big pump when BTC is in a consolidation phase? The answer lies in an indicator: Bitcoin Dominance (BTC Dominance).

What is BTC dominance?

In simple terms, it is the percentage of BTC's market capitalization in the total market capitalization of the entire crypto market.

The calculation formula is very simple:

BTC market cap ÷ total crypto market cap × 100 = BTC dominance rate

For example: BTC market cap is 60 billion USD, the total market is 120 billion USD → Dominance = 50%

What does this thing reflect? Investor psychology. High dominance = Money is all in the BTC “vault”; Low dominance = Everyone is bold, starting to gamble on altcoins for high returns in small coins.

Why is this indicator so crucial?

Historical data speaks:

• 2013: BTC dominance at 94%, because there were no other options (the crypto space was still in its infancy)
• 2017-2018 ICO Big Explosion: The dominance rate collapsed from 85% to 33%, indicating that a lot of new coins are competing for funds.
• DeFi Boom in 2021: The dominance rate stabilized in the range of 50-60%.
• Now: Basically fluctuating between 50-60%, the market has gradually matured.

Four Styles of the Market

BTC price + dominance change, we can see what the market is doing:

1. BTC rise + dominance rise = BTC big explosion, alts are thrown away
2. BTC rise + dominance drop = altcoin season is here, money is flowing to small coins
3. BTC falls + dominance rises = panic buying BTC
4. BTC falls + dominance falls = The overall market goes down, and everyone feels bad.

How to make money with this indicator?

1. Identify “altcoin season”

When BTC is on the rise and its dominance is falling (for example, dropping below 50-55%), this is a signal to buy alts at the bottom. Historically, this situation often supports several months of altcoin waves.

2. Understand market sentiment

• Dominance rate >65% → Market panic, everyone clings to BTC as a lifeline
• Dominance <45% → The market is ambitious and even a bit crazy (often a top signal)

3. Adjust your position

• High dominance → Conservative strategy, BTC accounts for 70%+
• Low dominance → Aggressive strategy, BTC drops to 30-40%, increase allocation to alts

Factors Affecting Dominance Rate

BTC price volatility → The most direct factor, whether it rises or falls will drive the dominance.

Altcoin Performance → If major coins like ETH and SOL lead the rise, the dominance rate will be lowered.

Market Sentiment → In panic, money flows to BTC; in greed, money rushes to alts.

Policy Trend → Regulatory policies favorable to BTC will boost its dominance.

New Coin Impact → Every time a new hot concept (DeFi, AI concept coins, etc.) emerges, it squeezes BTC's share.

Pitfalls to be aware of

⚠️ Interference of Stablecoins → Stablecoins like USDT and USDC have a huge market cap, which can lower the accuracy of BTC's dominance calculation.

⚠️ Do not rely solely on → Dominance is just a signal, not a holy grail. It is reliable when combined with trading volume, candlestick patterns, and on-chain data.

⚠️ Historical data does not guarantee the future → Just because it rose 50% last time, does not mean it will rise this time.

Take note of the key numbers

• Dominance >65% → Historical bottom range
• Dominance Rate 50-60% → Current Normal Range
• Dominance <45% → Caution, may be approaching the cycle top
• Current (Latest): About 55% (the specific number changes in real-time, check data websites)

Bottom line: BTC dominance is not a magic tool for accurately timing the bottom and top, but it can help you understand the market's current stage. If you want to be stable, monitor its fluctuations around 50-60%; if you want to be aggressive, wait to place your bets when it breaks through key points. The key point is: don't just look at this one indicator; using it in conjunction with other tools is the way to go.