Bitcoin Dominance Index Explained: Impact on Altcoins

Bitcoin Dominance Index Explained: Impact on Altcoins

-by Jaya Pathak

Bitcoin is the first decentralised cryptocurrency. Traders and investors often wonder how Bitcoin market has positioned itself in such a big position and is affecting other digital assets. One of the metrics which capture this relationship is the Bitcoin Dominance Index which reveals about the overall scenario of the crypto ecosystem and where capital is flowing.

What Even Is Bitcoin Dominance?

Bitcoin dominance is the percentage share of market capitalization relative to the total cryptocurrency market. It can provide profound insights into market behaviour. Exports are even saying that the price of Bitcoin will search to around 1 million dollars by 2033.

Bitcoin Dominance= Market Cap of Bitcoin/Market Cap of all Cryptocurrencies*100

How Does This Thing Actually Mess with Altcoins?

Alright so here's the weird part that nobody really explains properly. When Bitcoin dominance goes up, altcoins get absolutely down. But it's not magic or anything spooky. There are reasons.

When dominance climbs up—and this happens a lot by the way—what's usually going on is people are literally freaking out. Like actually panicking. And they start buying Bitcoin like it's the only safe asset in the entire universe. Or sometimes Bitcoin just falls slower than everything else, which means mathematically Bitcoin's taking up more of the market pie. Either way, money flows to Bitcoin. Money leaves everything else.

When dominance starts dropping—like when it gets below 40 percent or so—that's when altcoins actually wake up and start going nuts. Early 2021, dominance was dropping and Ethereum was just printing money. Every altcoin you looked at was mooning. That's what people call "altseason" by the way. It's just when people get confident and start throwing money at smaller coins hoping to get rich.

What Actually Makes the Number Move Around?

Bitcoin dominance doesn't just move randomly for no reason. There's actually real stuff causing it.

First thing is just like... investor mood basically. Vibes. When people are feeling good about Bitcoin—like actually optimistic—they buy more of it. When everyone's nervous and scared, they sell. It's that simple honestly. Just human emotion. Good vibes equal dominance up. Bad vibes equal dominance down.

Then there's government factor. If like a country comes out and says "yeah we think Bitcoin is cool, we're gonna regulate it properly," boom, people get more confident and dominance goes up. Then some politician somewhere says something stupid about banning crypto and it crashes back down. Government noise literally moves this metric around.

Adoption too. More people using Bitcoin, bigger market cap, more dominance. It's not complicated. And oh, technology stuff matters. If Bitcoin gets upgrades or network improvements or people think the tech is getting better, people get more confident and dominance follows along. Easy.

Then there's just like... random stuff. A major exchange gets hacked—dominance moves. Some famous person tweets about crypto—dominance moves. War happens—dominance moves. Crypto never stops trading so there's literally always something pushing this number around. Unlike stocks that close at like 4 PM, crypto is just trading 24/7 nonstop.

Actually Trading Using This Metric

People who actually make money with crypto use Bitcoin dominance as like one tool among many. Not like some crystal ball that tells the future. Just context that helps them understand what's going on.

So historically, certain levels have mattered if you look back. When dominance gets above like 70 percent, some traders are like okay, Bitcoin probably keeps going up. The 2020 bull run had dominance climbing above 70 percent and it actually worked out for Bitcoin so people remember that pattern. Opposite end, when dominance hangs around like 35 to 40 percent, altcoins have historically done really well. Again, not guaranteed or anything. Markets don't work like that. But it's a pattern people watch.

Volume is huge too honestly. Like if dominance is moving but volume is completely dead and pathetic, the move usually reverses pretty quick. But if dominance is moving on like fat heavy volume, it usually sticks around and goes somewhere. And obviously you're not just looking at dominance alone. You're combining it with support, resistance, oscillators, trend lines, whatever other tools you use. Anyone who made real money isn't betting their entire strategy on one metric. That's how you get destroyed.

Real Bitcoin Dominance Versus the Regular Kind

You'll see people talking about "Real Bitcoin Dominance" and you're confused about what that even means. Okay so regular dominance counts every single crypto. Everyone.

Real dominance is different because it only counts Bitcoin versus other proof-of-work coins. It basically ignores stablecoins and doesn't include them.

Why? Because there's like a ridiculous insane amount of stablecoin value in the market. USDT, USDC, USDC something bridged, like just billions and billions. If you include all that stablecoin stuff in dominance, Bitcoin's percentage looks lower. If you don't include it, Bitcoin looks higher.

In 2024 Real dominance was hanging around like 71 to 76 percent. Way higher than regular dominance. Right now, it's probably like 71, 72 percent or something. Just pick whichever one you prefer honestly. If you think stablecoins are "real" competition for Bitcoin, use regular dominance. If you don't think they matter, use Real dominance.

Conclusion

Bitcoin dominance is basically just showing you where money is going. When it goes up, Bitcoin's getting the cash. When it goes down, altcoins are getting the cash. That's literally the whole thing.

Where it gets useful is when you combine it with other analysis stuff. If dominance goes up but volume completely dies, that's different from dominance going up on massive volume. If dominance drops but Bitcoin's price is actually going up, that tells you something different than dominance dropping because Bitcoin is crashing.

Will dominance predict your future? No. Will it tell you exactly when the next altcoin explosion happens? Nope. But if you actually understand why dominance moves—the psychology, the capital flows, the sentiment behind it—you'll understand the market better than most people just randomly guessing. And in crypto, where like half the moves are just emotion and psychology, understanding sentiment gives you an actual edge.

Questions That People Ask

1.       What's 60% dominance actually mean?

Bitcoin is 60 percent of the market. Altcoins are 40 percent. That's pretty balanced, nothing crazy.

2.       Is high dominance good?

Depends. If you own Bitcoin then yeah obviously. If you're holding altcoins then no you hate it. There's no objective good or bad answer unless you know what you're actually holding.

3.       Can it reach like 100%?

Technically yes, I guess. But that would mean every altcoin is literally worthless. Not happening. The highest it's ever been is like around 94% and that was super early days.

4.       Does it change a lot?

Every single day honestly. Hourly during super crazy periods. But real actual trend reversals usually take like weeks or something. Daily moves are mostly just noise.

5.       Should I trade based only on this?

No. This is one tool. Use it with price action, volume, fundamentals, everything you know. If you're betting your entire strategy on one metric you're going to get absolutely destroyed.

 Explore: Moderntimes24.com