Winnie Muriuki

· 29 Nov 2021

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Facts about the Bitcoin Dominance

Bitcoin dominance measures the portion of the entire crypto market cap that Bitcoin holds. The measure plays a significant role in helping you know the trend of bitcoins as well as altcoins. How does it help? That’s something this piece talks about. So, let’s look into detail at the importance of Bitcoin dominance and much more.
How Does Bitcoin Dominance Works?
As mentioned earlier, bitcoin dominance can help you tell how bitcoin and altcoins are trending at that particular time. For instance, if it increases, the value of the rest of the altcoins against bitcoin is relatively low. On the other hand, if the bitcoin dominance decreases, the value of the rest of the altcoins is pretty high compared to the BTC one.
The Importance of Bitcoin Dominance
Once you identify whether the bitcoin dominance is high or low, it becomes easy to know whether the altcoins are uptrend or downtrend against bitcoin. If it is an uptrend, then it is wiser to invest in Bitcoin. However, once you notice that the dominance shows a downtrend, the best move is to invest in the altcoins. Some of your options in the second scenario include low caps, mid-caps, large caps, and ETH, just but to mention a few.
How to Calculate Bitcoin Dominance
Before calculating this figure, you have to identify the market capitalization of Bitcoin. You get it by multiplying the BTC price at that particular time by the number of coins issued. Once you have the product, go ahead and compare it against the combination of all the altcoins’ market caps.
Let’s take a look at an example.
Example
If the current BTC price stands at $10,000, and the total number of mined Bitcoins is 18 million, we can get its market cap. It stands at $180 billion since that’s the product of the two figures mentioned above.
The next step is to calculate the market cap of all the altcoins available. Ensure that you follow the same formula when calculating the market cap of all the altcoins. Find the sum of the market cap of all the altcoins. After that, add the total to the market cap of bitcoin. So, let’s say that the market cap of all the altcoins stands at $80 billion. The summation of that and the market cap of bitcoin, $180 billion, is $260 billion.
With all the figures in place, we now have all we need to calculate the bitcoin dominance. It is as simple as dividing the bitcoin market cap by the sum of the market caps or all the altcoins, not forgetting that of bitcoin.
So, bitcoin dominance = $180 billion / $260 billion
Under such circumstances, the bitcoin dominance stands at about 69 %
Other Interesting Facts about Bitcoin Dominance
Until 2017, the bitcoin dominance was always at almost 100%. That’s when the figure changed to less than 90%, and that made history. The next year, the dominance dropped drastically to 35%, and that’s the lowest it has ever been. It rose shortly after to about 70% by the end of 2019. Ever since then, one can say that it has been relatively stable.