I see many of you are still confused about what (BTC Dominance) is and why it matters. Today, I will give a brief explanation of this indicator because it’s really important if you want to understand how the crypto market operates.

What is dominance? Simply put, BTC Dominance is the percentage of Bitcoin’s market capitalization relative to the total market capitalization of all cryptocurrencies. It reflects Bitcoin’s dominance over other altcoins. The calculation is very easy: if Bitcoin holds $9 billion and all altcoins combined hold $1 billion, then DOM = 9/(9+1) = 90%. Currently, this index fluctuates around 55%, higher than in previous years but still below the 90% peak of early days.

Why is dominance important? Bitcoin is considered the base currency, the “king of crypto.” Most people entering the market first buy BTC or USDT, and when altcoins drop sharply, they move their funds back into Bitcoin to protect their capital. That’s why dominance has a significant impact on the entire market.

The crypto market usually has four main scenarios. First, BTC rises along with the entire market — this is the best scenario, with funds flowing into both BTC and altcoins. Second, BTC rises but altcoins fall — at this point, funds from altcoins or outside the market flow into Bitcoin only, causing DOM to increase. Third, BTC drops along with the market — this is the most common scenario, because when the king falls, the entire court shakes. Fourth, BTC moves sideways or slightly down while altcoins stay flat or rise — at this time, Bitcoin is gaining strength, preparing for the next altcoin rally.

When dominance increases, you need to know how to respond. If DOM rises and BTC price surges, it’s a sign of renewed market confidence, with traders selling altcoins to buy Bitcoin. If DOM rises but BTC price drops, altcoins will likely fall even more, and many investors will sell to USDT to avoid heavy losses. If DOM decreases and BTC rises, most altcoins will outperform BTC significantly. If DOM decreases and BTC also drops, you should carefully observe capital flows — altcoins may fall but then rebound higher than before.

When dominance increases, capital from altcoins is gradually pulled into Bitcoin, making it harder for altcoins to surge strongly. However, some promising projects can still prove their value and break out strongly. Therefore, the best strategy now is to buy and hold quality altcoins with real products, and most importantly, avoid buying at too high a price.

Looking back at history, in 2016, Bitcoin was under $100, Ethereum didn’t exist yet, and BTC accounted for over 90% of the market cap. In 2017, Bitcoin surged strongly, and by mid-year, ICO activity exploded, causing DOM to drop to just 35%, the lowest at that time, as Ethereum reached 30% due to ETH demand for ICO participation. At the end of 2017, DOM recovered above 65% when BTC hit $20,000. In mid-2018, DOM fell to 33% as whales took profits, then rose again to 45%. At the end of 2018, BTC crashed but DOM stayed around 50%. In April 2019, DOM hovered between 50-55% as investors regained confidence. In 2020, after BTC dropped from $3,800 to $41,000, DOM surged close to 74%. And now, we see what dominance means in this new context — a balanced index at around 55%, reflecting capital distribution between BTC and altcoins.

Besides BTC Dominance, you should also monitor other indicators like TOTAL, TOTAL2, DEFI, USDT.D — this requires practical experience and a feel for capital flows. That’s why beginners often get wrecked. To catch market trends, always keep an eye on this index — it’s the key.