[Feature] BTC Dominance, An Indicator You Can't Ignore

BTC.D, or Bitcoin (BTC) Dominance, is an indicator that measures the ratio of bitcoin’s market capitalization to the rest of all altcoins and stablecoins. Simply to say, it’s bitcoin versus all. BTC dominance is highly used by investors and traders as a guide to adjust their portfolio structures and trading strategies. Through historical data, whenever BTC dominance hits a certain threshold, the crypto market will make a big move.

The formula of BTC dominance is simple, it’s just the percentage of bitcoin’s market cap in the total cryptocurrency market cap. As each crypto website has its own calculation of BTC dominance, it’s best to refer to the one that most traders use, which is BTC.D in TradingView.

Before the explosion of ICO in 2017, BTC dominance is always lingering between 95% to 99%, it has no reference value back then. As crypto, not just only bitcoin alone, had collectively gained attention from people all around the world, thus distributing the bitcoin market share to other altcoins. The rise of stablecoins also suppressed BTC dominance. Back then there is only USDT, but now we have USDC, BUSD, and a lot more stablecoins (not all of them are that “stable” though). So to speak, when funds move out from bitcoin into altcoins and stablecoins, BTC dominance would go down.

Source: https://www.statista.com/statistics/1255835/stablecoin-market-capitalization/

In 2019, a bitcoin and an Ethereum were worth $3800 & $140 respectively. Now, they are worth $19,000 and $1,600, a tremendous growth of 500% and 1140%! As you can see that Ethereum grew much stronger than bitcoin, its market dominance increased on the same par, and vice versa for bitcoin.

While there isn’t any rule or iron laws on what the BTC dominance percentage should be, it shows a pattern that can be hardly ignored by investors and traders. Through TradingView’s chart, it is very obvious that 40% has become a strong support for BTC dominance, ever since the bitcoin price crashed from its peak due to China’s crypto ban in May 2021. Whenever BTC dominance is close to 40%, or goes below 40%, it will fight back and rebound. Both occasions that happened during September 2021 and January 2022 have proven this. The question is, will history repeat itself? If not, how low can the BTC dominance go?

Here are some potential scenarios for bitcoin to regain its 40% mark:

· Bitcoin price unchanged, altcoins price drops.

· Bitcoin price rises, altcoins price drops.

· Bitcoin price drops, altcoins price drops even more.

One of the most uncertain crypto events happening right now is no doubt the Ethereum’s Merge. The price of PoW-related crypto, such as ETC and Ravencoin, skyrocketed in the result of ETH miners’ migration; Ethereum’s price rebounded more than 60% from its low on June 2022. ETH-theme altcoins give BTC dominance a hard time, for now. If history does repeat itself somehow, most likely ETH and its likes are getting “rekt”.