In the crypto market, you often hear that bitcoin dominance is going down and the price of alternative coins are picking up or constantly moving forward. For instance, Ether and Bitcoin cash is on the rise like crazy. In this article, let us try to explain what is bitcoin dominance!
The story of Crypto started with Bitcoin as the only bitcoin was in the market and in the initial crypto exchange, bitcoin was transacted only in a local currency, the dollar. Slowly some more crypto coins started coming into the market and Ethereum made tokens through smart contracts and made it easier.
Now, bitcoin is not the only power in the market, but also the market of alternative coins is increasing at a rapid rate. People have started moving their money from Bitcoin to other cryptocurrencies in a big way.
The amount of money that people invest in the crypto market today is in two parts, one part in the Bitcoin market and the rest in the other coins market. The amount of money in the coin market is called “coin market capital”.
Now let’s understand the Bitcoin Dominance in an easy language. Let’s assume that the total capital of the coin market is $100 million. Of this $100 million, 60% is of Bitcoin and the remaining 40% is in other coins. Accordingly, Bitcoin’s Dominance is 60%. This is how we calculate the dominance of any cryptocurrency, so now we estimate that Bitcoin holds 60% of the total Crypto market.
Now let’s talk about what we know about increasing or decreasing bitcoin dominance in the market! Bringing new investment is as good as winning the game in the market, so it makes no difference if the investment is moving from one coin to another, but if new investment is coming in the market, which is certainly good news for the crypto market.
The total market capital will start increasing if the new investment comes in the market. The confidence of the investor is increasing in other coins apart from Bitcoin, and that’s a healthy sign for the crypto market.
Now, if there is more investment in bitcoin, the dominance of bitcoin will increase, and if the money from bitcoin goes out of the market or goes to other coins, that means that bitcoin’s dominance is coming down. Traders and investors see that if the dominance of bitcoin is increasing, then it clearly shows that money in the market is moving toward Bitcoin or in other words, other coins are losing their ground to Bitcoin.
If the money is going out of bitcoin into alternative coins, then the dominance of bitcoin will come down and the price of alternative coins will go up.
Because bitcoin’s dominance is directly related to the investment in bitcoin or the exit from bitcoin to alternative crypto coins. Therefore, whenever the dominance of bitcoin goes down, the value of altcoin rises.
Traders and investors decide on this basis that when they have to invest in the alternative market. It is not necessary though that all the alternative coins of the market will go up if Bitcoin’s dominance will go down. But if we talk about the other coins in the market, then one of the major coins is with a large market share is in ether, and as expected ether goes up or down directly rational to Bitcoin.
Therefore, when other crypto coins go up, the ether remains down. But that doesn’t necessarily mean that the Bitcoin dominance is decreasing, then only the alternative coins will go up. Sometimes times investors withdraw money from bitcoin, as the big whales keep a close watch on their profit. Because of this, the total capital of the coin market goes down. Or maybe the investment goes down because the alternative coins have no takers. But even then there is not much effect on the price of the smaller coins.
While looking at Bitcoin Domains, you also read that Coin Market Capital is not going down. If Bitcoin Dominance is coming down but there is no change in Coin Market Capital or it is increasing, then you see a boom in the other cryptocurrencies in the market. You can keep a watch to find Bitcoin Dominance on Coin Market Cap or trading pattern.
At the moment, Bitcoin Dominance is running close to 60-65%. If it comes down and the coin market capital does not decrease or the capital also increases, then for sure alternative crypto-coins market will see a large boom. This is what’s the simplest way to understand crypto dominance, certainly led by Bitcoin right now. But you never know when Bitcoin Cash, Ether, or even smaller coins like Doge or 1Up will take over.
