Bitcoin dominance is the ratio between the market capitalization of BTC and the total market capitalization of all cryptocurrencies. This indicator is important because it lets investors know how much BTC is worth compared to other cryptocurrencies and helps investors make more informed investment decisions. Currently, the market cap of BTC is about $65 million while the total market cap of all cryptocurrencies is about $100 million. That means that Bitcoin dominates the entire cryptocurrency market by more than 60%.
In theory, BTC dominance should decrease as altcoins gain popularity, but that is not exactly how it works. Using the dominance index to determine whether to buy or sell can be risky. There are numerous altcoins that can have inflated valuations and artificially decrease BTC's dominance. While some of them might be good investment opportunities, others may not.
Initial Coin Offerings (ICOs) are a key reason why Bitcoin dominance has declined. ICOs are a method by which companies with coding expertise can raise money in the cryptocurrency market. However, the volatility of the market made ICOs unsustainable. In the middle of 2018, Bitcoin's dominance was back to the 60s. The reason was the sell-off of many of the assets released by ICOs.
Understanding the dynamics of Bitcoin dominance is critical for new and experienced investors alike. It gives you a framework for understanding the current state of the market and helps you spot trends in the cryptosphere. The cryptocurrency ecosystem is constantly evolving and new coins, technologies, and concepts are released every day. This means that historic market data is quickly becoming irrelevant. The BTC dominance index, however, is a good tool for investors to understand the crypto market.
BTC dominance is a key indicator of Bitcoin's value as a percentage of the entire crypto market. This ratio can help you determine the best time to buy or sell BTC. If the BTC dominance index increases, this is a sign that BTC is performing better than other altcoins. If it decreases, this could mean that altcoins are gaining value against BTC.