What Does Bitcoin Dominance Mean?
By reading the article “What Does Bitcoin Dominance Mean?” published in Adaas Investment Magazine, you will get acquainted with the BTC.D index for Bitcoin and what are the features of Bitcoin Dominance in general. This level of familiarity can be enough when you need educational information about this topic.
Table of Contents
What is Bitcoin Dominance?
The term Dominance means domination. What does it mean to dominate the cryptocurrency market or other financial markets? It is good to know that to work in the financial markets as a trader or investor, you have to learn a lot of terms, each of which is related to a skill.
For example, areas of price support and resistance are terms related to technical analysis of asset prices, and areas of fear and greed are related to the psychological skills of financial markets. Bitcoin dominance is also a term related to the skill of market psychology and technical analysis of the BTC.D index simultaneously.
Simply put, the BTC.D or Bitcoin Dominance Index represents the share of Bitcoin in the total cryptocurrency market. When this index rises, the bitcoin cryptocurrency occupies a larger share of the total market, and when it declines, other cryptocurrencies gain a larger share.
An example to better understand the Bitcoin Dominance
As you can see, the BTC.D Index represents the share of Bitcoin cryptocurrency in the total cryptocurrency market. Imagine the total value of the cryptocurrency market is $100 million and the BTC.D or Bitcoin Dominance Index shows 53.
In this case, Bitcoin has $53 million of the total market value of $100 million. Understanding the concept of the Bitcoin Dominance Index is just as easy!
Reviewing the change in the Bitcoin dominance index and its effects.
Now that we are familiar with the concept of bitcoin dominance, it is time to study how the BTC.D index changes.
As you may have noticed by now, when the BTC.D index experiences an upward movement, the price of Bitcoin will move higher with it. The price of an asset increases when the amount of capital in its market increases.
Simply put, when investors and traders in the cryptocurrency market want to buy bitcoin, they withdraw their money from other markets such as Ethereum and any other altcoins and enter the bitcoin market. As a result, the volume of the Bitcoin market cap increases, occupying a larger share of the total market value.
The Bitcoin Dominance Index is used to reduce the need for capital outflows from the Bitcoin cryptocurrency market. Thus, many traders and investors see the downward trend of the Bitcoin dominance index as a signal for the growth of other cryptocurrencies. In this situation, the capital in the bitcoin market is moving to other markets and may be hosted by other cryptocurrencies or even stable coins.
Bitcoin Dominance or BTC.D Chart.
If you have read this article from the beginning, you have seen the phrase BTC.D many times. BTC.D is the symbol of the Bitcoin dominance index, which you can use for free at Tradingview.com to access its live chart.
On this website, you can use many analytical tools for free, in addition to other analysts’ opinions on the Bitcoin Dominance Index. It is also possible to change the time frame to observe the behavior of the Bitcoin Dominance Index in the long and short term to make your analytical decisions more accurate.
To access the instant chart of the Bitcoin Dominance Index on the TradingView website, you can use the following link or search for BTC.D in the search section of this website.
History of Bitcoin Dominance Index.
When Bitcoin was introduced to the cryptocurrency market, it can be said that there was no other cryptocurrency. Thus, the BTC.D index showed the numbers 99% to 100% for Bitcoin.
With the passage of time and the introduction of powerful cryptocurrencies such as Ethereum and Solana or even Stable Coins, Bitcoin has been forced to share its market dominance with other cryptocurrencies. Thus, one can expect the Bitcoin dominance index to take more downward behavior in the long run.
But the most important thing to consider about the long-term decline of the Bitcoin dominance index is its lack of impact on the price of bitcoin. You may have concluded in the effects of the bitcoin dominance index that if this index falls, the possibility of bitcoin price decline will increase; But if you are a professional financial market analyst, you know that an index alone can not affect the price of an asset.
What is the importance of the Bitcoin Dominance Index?
Bitcoin is recognized as one of the most important assets in the cryptocurrency market. Successful performance in decentralization and security has made many investors interested in this cryptocurrency.
You may have heard the term king of cryptocurrencies attributed to bitcoin many times. This inherent importance of bitcoin among investors has led analysts to focus on the bitcoin dominance index.
This indicator can indicate the inflow and outflow of bitcoin market capital. Many traders will reconsider their investments in other cryptocurrencies when the index rises, and when the BTC.D index declines only due to the outflow of money from the bitcoin market, they become more optimistic about the altcoin market.
Bitcoin dominance index falls when Bitcoin price rises. (EDUCATIONAL THEORY!)
After 2018, when the cryptocurrency market entered its rapid growth phase, many analysts have published reports of bitcoin price growth as the BTC.D index declined.
When the bitcoin dominance index decreases, it indicates a decrease in the capital in this market, which usually reduces the price of this cryptocurrency, but when a large capital enters the cryptocurrency market and is divided into other cryptocurrencies, the bitcoin dominance falls.
The end words
At Adaas Capital, we hope that by reading this article you will be fully immersed in the Bitcoin Dominance mean. You can help us improve by sharing this article which is published in Adaas Investment Magazine and help optimize this article by submitting your comments.
Simply put, the BTC.D or Bitcoin Dominance Index represents the share of Bitcoin in the total cryptocurrency market.
When this index rises, the bitcoin cryptocurrency occupies a larger share of the total market, and when it declines, other cryptocurrencies gain a larger share.