January 15, 2025 Welcome back to our blog, where we aim to equip traders and investors with the knowledge needed to understand the crypto world and how to master the markets with our wide range of advanced crypto bots.
Today’s post will delve into a topic we’ve briefly mentioned countless times throughout our blog – Bitcoin dominance. We’ll tackle what it is, how it is calculated, and why crypto traders and investors need to keep track of it.
Before we move forward with our review on BTC dominance, this is to remind you that all of the information presented in this blog post is intended solely for educational purposes and should not be considered a call to action or any other kind of financial advice. Traders must consider their financial status and risk tolerance before employing any crypto trading strategy. Crypto trading involves inherited risks; consulting with a qualified financial advisor before making any investment decision is highly recommended.
In the world of cryptos, traders, investors, and other participants are always looking for data and indicators that can help them assess what’s going on or what’s about to happen in the crypto markets.
Out of all of these different metrics, one that doesn’t get much attention (although it is very popular among many crypto experts) is a measurement called Bitcoin dominance. The idea behind it is pretty easy to grasp.
Shortly put, BTC dominance is a metric for the ratio between the market cap of Bitcoin and that of all other cryptos in percentage form. In other words, it measures the relative size of Bitcoin’s market cap compared to the rest of the crypto space.
As a reminder, market capitalization refers only to the value of currently circulating cryptos. It does not consider any tokens that have not yet been released, even if they are scheduled to be created in the future.
So, for example, it means that if the total value of all the tokens in circulation in the entire crypto world is 2 trillion dollars, and the market cap of all circulating Bitcoins is 1 trillion dollars, then BTC dominance would be 50%.
As its name suggests, BTC dominance is essentially a comparison between the market cap of Bitcoin and all other altcoins. There are two common ways to calculate this metric.
The first and more intuitive one is similar to the one we shared above. It is to divide the total value of the entire crypto market with the market cap of Bitcoin.
The second method of calculation, which many crypto experts find to be more informative, is to divide the market cap of only the top 125 cryptos with the BTC market cap. While gathering all of the necessary data for this method might be slightly more challenging, there are many platforms like TradingView where you can find this data quickly and free of charge.
As you can see, although most people who choose to examine the dominance of crypto would likely decide to study Bitcoin, technically, you can calculate the dominance of any other altcoin similarly.
To fully understand the importance of the BTC dominance indicator for crypto traders and investors, a good place to start is to examine its movement across the life cycle of the crypto world.
As we all know, Bitcoin didn’t have a lot of alternatives in the early days of the crypto world. Back then and up until 2017, BTC dominance levels were at their highest, moving between 80% to 95%.
This extreme dominance started to weaken in the first half of 2017. In that period, the crypto world saw many initial coin offerings (ICOs) taking place. With ETH and other ERC-20 tokens attracting substantial investments, it pushed the total market cap of the crypto world by up to 470% (from around $20 billion to about $115 billion), while BTC dominance set its all-time lows at 32%-33%.
In 2018, when the bull run exhausted itself, and bearish market conditions took place, crypto investors started to show their preference for less risky assets, which often happens in bear markets. This shift of funds from higher-risk altcoins into the relative haven of Bitcoin again sent BTC dominance rising, reaching about 70% in September 2019.
These BTC dominance levels remained relatively stable until the next bull market of 2021 when a new interest in altcoins and growing concerns about the energy consumption of Bitcoin mining led to a significant weakening in BTC dominance.
However, the bear market of 2022 didn’t cause BTC dominance to go up as it had in the past, and it continued its decline until the end of 2023 when it surpassed the 50% mark for the first time in over two and a half years.
Nowadays, after 2024 turned out to be an excellent year for cryptos, BTC dominance levels are currently at around 58%, after spending some time over 60% in the past year.
If we take a closer look at this data, we draw some conclusions about the relationship between BTC dominance and market cycles in the crypto world:
Now that we have covered what you need to know about BTC dominance from a theoretical standpoint let’s see how crypto traders can utilize this metric in their portfolio management and daily crypto trading.
By examining the relationship between BTC dominance and the actual price of BTC, crypto traders can gain some insight into where they should direct their focus – Bitcoin or altcoins.
For many trading experts, when BTC dominance is decreasing while the price of BTC is either rising or stable, it signals that altcoin season is upon us and that they should adjust their portfolio and trading strategies toward gaining more exposure to altcoins since they could potentially outperform Bitcoin shortly.
On the contrary, when BTC dominance is going up while BTC price moves downwards, it can be interpreted as a sign that crypto traders should minimize their exposure to altcoins at the moment or at least re-adjust their automated trading strategies to be more appropriate for bearish conditions.
When it comes to Bitcoin, a rise in BTC dominance while BTC price goes up (like during most of 2024) often indicates that bullish traders should focus their crypto trading bots mainly on Bitcoin rather than altcoins.
With that said, remember that these are just preliminary guidelines for potential trading ideas. In any case, the BTC dominance metric should only be used as a supportive tool for your already well-established decision-making process instead of a primary indicator for your automated trading strategies.
The BTC dominance metric has been a popular tool for many crypto traders and investors for making the most informed financial decisions. From gauging overall market sentiment to deciding whether they should focus on Bitcoin or altcoins when combined with other market data, BTC dominance is considered a pretty accurate complementary indicator among many participants in the crypto community.
As we enter 2025, BTC dominance could arguably be one of the most informative indicators for determining the level of maturity of the crypto world and working out if altcoins are really on their way to fulfilling all of their undeniable potential.
As we already mentioned, in the early days of the crypto world, Bitcoin completely dominated the crypto scene. Only when other cryptos had been developed, offering unique features like staking, smart contracts, and other real-life use cases, we saw a decline in BTC dominance.
In other words, leaving cyclical patterns aside, many experts suggest that a consistent and steady decline in BTC dominance is a crucial sign of the crypto world maturing and finding its place in the global financial markets. It can be seen as a red flag when this fails to happen.
Over the past year, while Bitcoin has had abundant positive news, from Bitcoin ETFs to halving events, cash-settled option trading, and the latest rumor about a U.S. Bitcoin reserve plan, the rest of the crypto world lacked supportive narratives.
With many crypto traders sitting on the fence at the moment as they patiently wait for yet another altcoin season to kick in, there are also growing concerns about the potential of most altcoins to create new appealing narratives and to attract fresh inflows from outside the crypto ecosystem that will enable them to outperform Bitcoin.
This is why 2025 could be a pivotal year for the world of cryptos. Will Bitcoin continue toward new all-time highs, leaving the rest of the crypto world behind, or will altcoins be able to claim their ground and prove to all the skeptics that cryptos can be a viable alternative to the fiat financial system?
In our first blog post of 2025, we covered what could potentially be one of the most urgent topics in the crypto world this year – Bitcoin dominance.
By examining what it is, how it is calculated, and how it can help us optimize our crypto portfolio and adjust our automated trading strategies, we can understand why tracking it to evaluate market sentiment and the future of altcoins is essential.
While BTC dominance is not intended to replace any of your diagnostic methods that we covered in the past, whether technical analysis, tokenomics analysis, on-chain analysis, or any other market research, it can still provide us with some additional insights that can help us to understand the markets better and assist us in becoming more profitable traders.
Whether or not a new altcoin season is around the corner, we have everything you need here at Cornix to take full advantage of whatever the markets offer. We’ve covered you from a wide range of state-of-the-art crypto bots to demo trading, backtesting, and advanced trading terminals.
If you want to step up your trading game in 2025, check out our free trial and flexible pricing plans and explore firsthand how Cornix can help you become a more efficient and profitable crypto trader.
The crypto markets wait for no one, so there’s no better time than now to take advantage of it and take control of your financial future.
