What is Bitcoin dominance and why is it a key factor for investors?
In the previous article, I wrote about what a Bitcoin ETF is and why we witnessed such a crazy pump in BTC in just a few days because of it. But many have also noticed that despite the Bitcoin rise, altcoins are barely growing.
Of course, there are exceptions, but the majority of altcoins are hardly increasing in price while Bitcoin continues to surge to new highs, and the awaited altcoin pump of 200–300% is still not happening. This raises the question, why is this the case?
The answer is quite simple: it’s because investors currently have the most confidence in Bitcoin, rather than any other cryptocurrencies. After all, ETF approval will be for Bitcoin, so it’s logical to stock up on it, isn’t it?
You can understand why investors are choosing BTC today by looking at Bitcoin dominance, but first, let me explain what it actually means, and then we’ll move on to the present day.
Bitcoin dominance - refers to the percentage of Bitcoin’s market capitalization relative to the total market capitalization of all cryptocurrencies.
Market capitalization - represents the total value of all coins or tokens of a specific cryptocurrency in the market. It indicates how expensive or significant that cryptocurrency is in the overall cryptocurrency market.
In simpler terms, Bitcoin dominance shows the proportion of the market that Bitcoin occupies compared to other cryptocurrencies.
If Bitcoin dominance is high, it may indicate that investors prefer to allocate their investments to Bitcoin and consider it the most reliable and stable investment instrument.
However, a decrease in Bitcoin dominance may suggest that investors are becoming more interested in other cryptocurrencies and consider them more promising. This could indicate a shift in investment preferences.
Therefore, Bitcoin dominance can serve as an indicator of market conditions and changes in investor preferences. If you want to maximize your profit in this market, it’s important to keep an eye on Bitcoin dominance!
At the time of writing this article, Bitcoin dominance is slightly above 54%, which is quite significant considering the large number of altcoins in the market today.
Most likely, large players are buying Bitcoin instead of altcoins, especially in anticipation of the approval of a spot Bitcoin ETF. Perhaps this is to provide liquidity in the future for buyers of the spot Bitcoin ETF.
If you take a look at the BTC price growth chart in recent days, you will be surprised to see that it is quite similar to the dominance growth chart.
This is indeed interesting, but how can we profit from this?
The key is that when Bitcoin dominance is high, it means that altcoins are much cheaper compared to BTC, as most people prefer to hold their funds in Bitcoin at the moment.
So, let’s follow the teachings of Warren Buffet! In our case, we sell Bitcoin and buy fundamentally strong and promising altcoins.
“Be fearful when the markets get greedy, be greedy when the markets get fearful.”
So, what can we buy? Personally, I bought aptos, arbitrum, atom, dot, chia (bought at a dump), hbar, XRP, and XLM. But it’s important to note that I chose coins that I believe in. I recommend you make your own decisions!
Furthermore, I didn’t sell all of my Bitcoin; I kept a good portion of it in case it reaches $40,000 or higher, as I believe that is a possibility.
If you are not willing to risk your Bitcoins by investing in unfamiliar altcoins, then it’s better not to shift from one asset to another. But if you have an understanding and desire to take risks, you can at least consider allocating a portion of your BTC into altcoins.
Later, when Bitcoin dominance falls, let’s say below 40%, I might start changing back from altcoins to Bitcoin. However, that will depend on the situation, so make sure to subscribe to the channel, and I will provide updates along the way.
By doing things strategically now, you will be able to buy more Bitcoins in the future than you currently have! But this is a long-term plan, and it may take over a year to materialize, but considering the potential gains…
Now, another important point is where you can view the Bitcoin dominance chart. I recommend using TradingView — it’s a platform for traders where you can track various assets, not just cryptocurrencies.
It is available for free, but there are also paid features that you probably won’t need at this stage: www.tradingview.com
Once you register on the platform, enter BTC.D in the search bar for charts, and voila, the Bitcoin dominance chart will be right in front of you. All that’s left is to study it!
P.S. Just please be attentive and note when this post was published and what the current date is, as the proportions of dominance may have changed. So, before buying anything, study the Bitcoin dominance chart independently.
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