Bitcoin Dominance is at all-time low. What can it tell us?

September 20, 2022

Bitcoin

Bitcoin Dominance is at all-time low. What can it tell us?

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Cryptocurrency never ceases to surprise. New occurrences spring up and sometimes raise shock waves across the crypto space. With crypto, little details can cause upward or downward movement in the market. So, it is vital that we understand these shifts in crypto space. However, there are occurrences that might seem new but are repeated occurrences in the crypto space or patterns that have formed over the years. These patterns or trends are tested indicators of the direction of the market, especially since they have occurred previously with similar results following. Therefore, crypto users and experts alike often look out for repeated patterns. One such pattern is Bitcoin Dominance.

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What is Bitcoin Dominance?

When discussing Bitcoin dominance, the subject matter of marketing capitalization arises, as it is critical to the definition of Bitcoin dominance. Market capitalization in cryptocurrency simply refers to the total value of a digital asset in circulation. On the other hand, Bitcoin dominance refers to the ratio of Bitcoin market capitalization to the total of the rest of the crypto space. So, that is the total value of Bitcoin in circulation to the total value of all other cryptocurrencies in circulation.

The state of Bitcoin dominance is often regarded as being a strong indicator of where the market is tilting toward. Just as the price of BTC greatly influences the state of the market, so also does Bitcoin’s dominance influence the state of the market.

All Time Low for Bitcoin Dominance, What That Represents?

Beyond defining Bitcoin dominance, you must understand its implication for the crypto space. The correlation between Bitcoin dominance and the market is one that when Bitcoin dominance (that is, its market cap) is higher than the total market cap of all altcoins, the price of BTC rises, and the price of altcoins decreases. Inversely, if the total market cap of all altcoins is higher than that of the Bitcoin market cap, the prices of altcoins increases while the price of BTC decreases.

For this reason, many industry experts monitor the level of Bitcoin dominance in the market and use the insights derived from shaping their investment portfolios or advising users on which way the crypto market is heading. However, there are other insights that we can derive from Bitcoin dominance levels, especially when it is at an all-time low. Therefore, here is what Bitcoin dominance being at an all-time low means for the market and crypto traders.

In early September 2022, Bitcoin dominance was at its all-time low. This could be attributed to different reasons and could similarly indicate various outcomes.

The continued surge and uprising of altcoins have added more market cap to the altcoin ecosystem. Trending developments in cryptocurrency like DAO, metaverse, NFTs, and others continue to gain more attraction daily. More people are engaging in these developments, especially due to the fall in crypto prices and mid-rise and drop in the price of BTC. Crypto users have therefore looked for ways to continue earning profits in crypto despite the indifferent nature of crypto prices. Owning and selling Non-fungible tokens have become a major means through which users earn profits in crypto despite the price of crypto. There is also the development of buying new coins during their whitelisting and the rise of the metaverse.

All these put together have helped the continued rise of altcoins market cap, which has led to the drop of Bitcoin dominance. This is because most new developments in cryptocurrency require the use of altcoins like BNB, ETH, SOL, and others, as they are more flexible with a flexible ecosystem and protocol to accommodate changes and present a truly decentralized market. Unlike BTC which is restricted in its ecosystem and protocol.

Insights

As many crypto experts suggest, this tells us that we are gradually entering the ALT season. Alt season is a period where altcoins steadily outperform Bitcoin in the market. In this period crypto users often adjust their portfolios to gain more profits from altcoins, and the fall in Bitcoin dominance is often an indicator of the long-awaited alt season.

It also shows us that the market is at a critical point in terms of the direction it closes to follow. The market based on Bitcoin dominance can lead to an alt season, but do not rule out the possibility of a total reversal, such that the all-time low of Bitcoin dominance signifies an end to the fall of Bitcoin dominance and the start of its resurgence. It is best to observe the market for a few more days before making major investment decisions.

Conclusion

In summary, Bitcoin’s dominance is a major market indicator to look out for. Although insights cannot be 100% correct, accurately predicting the movement of the market through BTC dominance levels would help any crypto user maximize his or her profits. So, always treat the Bitcoin dominance level as a guide to inform your trade decisions.

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