23 kwi 2025
Bitcoin dominance, an often overlooked metric, can help investors navigate the cycles of the crypto market. Do you want to understand when to buy altcoins and when to focus on Bitcoin? Here's your answer.
Kacper Tomasiak
Web & SEO Manager at Swapped.com
Bitcoin dominance is defined as Bitcoin’s share in the entire crypto market. While this metric can seem boring, it is the ultimate insight into market dynamics. It is what many investors ignore when they’re just starting out in the crypto space, but they soon realize that it was foolish of them to do so. But what does Bitcoin dominance actually tell us? Let’s unpack all the information and tune out the noise.
What is Bitcoin dominance?
Bitcoin dominance refers to the ratio of Bitcoin’s market cap to total cryptocurrency market capitalization. For instance, if the total crypto market cap is at $4b and Bitcoin’s market cap is at $2b, Bitcoin dominance is equal to 50%.
This metric indicates whether the market is risk-on or risk-off. As an investor, it lets you know what the current conditions are, if it’s worth buying altcoins or Bitcoin more, and so much more.
Although it may seem quite technical, it is a powerful tool for understanding the cycles and capital flow in the cryptocurrency market.
Opportunity cost and Bitcoin dominance
Every time you purchase an altcoin, you are effectively betting that it will outperform Bitcoin; thus, you’re incurring an opportunity cost. During unfavorable times and an upwards dominance trend, it’s better to think twice. Obviously, it doesn’t mean that every single altcoin will underperform, but the overall altcoin market in general—there can be some exceptions.
Keeping track of Bitcoin dominance lets you better understand if you’re better off buying into the altcoin market or just holding BTC.
During uncertain times, especially concerning the global markets, dominance tends to be on the rise. In contrast, when money printers are turned on 24/7, the dominance plummets and altcoins outperform.
Check if your altcoin is really outperforming Bitcoin, or is it just an illusion?
Bitcoin dominance and the altcoin market
Bitcoin is always the driver of the entire crypto market. When Bitcoin dominance falls, it typically means that an “alt season” is coming, where cryptocurrencies with smaller capitalizations see massive gains in a short period of time.
This often coincides with good market sentiment, high risk appetite, and euphoria phases. These periods are usually short-lived and can last anywhere from a few weeks to a few months.
It’s also crucial to note that even during market rises, the dominance can go up too. In this scenario, altcoins go up slightly or stay flat on their USD pairs but bleed against Bitcoin.
Risks in the altcoin market
The altcoin market is much riskier than Bitcoin. While most of the altcoins are unproven with unknown utility, the rest are straight-up scams. These coins have thin order books and wild price swings both to the downside and upside.
During times when Bitcoin dominance drops, it may seem that everyone is printing money on those tokens. Don’t let the FOMO influence your decisions, as on a long enough time horizon all altcoins go down against Bitcoin indefinitely.
Ignoring Bitcoin dominance can lead to underperforming the market while taking on more risk and exposing your portfolio to deeper drawdowns.
Denominating a portfolio in satoshis
While not many investors do this, denominating your portfolio in satoshis despite the bear and bull markets is a great exercise to understand whether you are outperforming, keeping pace with, or underperforming the market.
Risk-adjusted returns are very important. Ask yourself this question: What’s the point of taking on more risk in the altcoin market and not being rewarded at all? Isn’t it just better to stick with Bitcoin in risk-off environments?
Bitcoin dominance is just Bitcoin's share in the total crypto market.
Historical context of the Bitcoin dominance
Although Bitcoin has been with us since 2009, the dominance metric wasn’t used at all until the 2017 bull market because there were simply not enough projects back then.
Bitcoin dominance had been hovering around 95% until the end of Q1 in 2017. After this period was when the epic altcoin rally started. Bitcoin dominance reached a low of around 35% in early 2018. While it is technically in a downtrend, it didn’t make a lower low in the 2022 bear market, which poses a question of what’s next.
At the time of writing this article, Bitcoin dominance is at 64% and still keeps trending higher, likely indicating uncertainty around the altcoin market. The short-term target can be placed at 66%, but it is usually the 71% level that has seen real trend reversals.
Quantitative easing and its impact on Bitcoin dominance
Before discussing the impact of quantitative easing on Bitcoin dominance, let’s see what quantitative easing really is. QE, or quantitative easing, is the process of injecting liquidity into the financial system. It was seen in 2020 and 2021 when the largest stimulus package was released to counter pandemic's consequences like disturbing supply chains and mass layoffs.
The extra liquidity did find its way into Bitcoin and other risk assets, but altcoins were the main beneficiaries due to lower market cap and higher volatility. Therefore, Bitcoin dominance tends to drop during QE periods because altcoins outperform.
Stablecoins and Bitcoin dominance
Stablecoins like USDT or USDC have amassed a combined market cap of over $200 billion and are one of the main use cases of programmable blockchain platforms like Ethereum. Back in the day, stablecoins were just a tiny percentage of the total crypto market cap, but with time they became very substantial.
Considering stablecoins are a big chunk of the market, many argue they shouldn’t be included in the total crypto market cap, as it distorts the image of Bitcoin dominance. No matter how you measure it, however, the Bitcoin dominance is strong and the trend is clear.
Sudden shifts in Bitcoin dominance
Dramatic shifts in Bitcoin dominance usually signal trend reversals and incoming volatility. A spike in the dominance means that the capital is fleeing the altcoin market. On the flip side, a sharp drop indicates a risk-on environment with lots of speculative investment.
If you look at the chart, you can notice a pattern that the dominance follows. It usually climbs the stairs up for a long time, and when the time is right and good conditions align, it seems to take an elevator down. Interesting how this works, isn’t it?
The dominance acts as a sentiment checker for the entire crypto market.
Incorporating Bitcoin dominance into your investment strategy
Bitcoin dominance is a powerful tool when used correctly. The dominance provides a clear signal when and where to rotate your capital—it can act as an entry or exit signal into the altcoin market. Use it to rebalance your portfolio wisely, and don’t be left “bagholding” an altcoin since most of them don’t make it to the next cycle.
Managing risks effectively
While it is a useful metric, you shouldn’t solely rely on it. Keep in mind the bigger picture with inflation and employment data, use stop-losses, and, most importantly, have a plan you stick to. Ideally, you want to sell your crypto when the price is high and buy back when it is low. Also, consider holding the US dollars or other fiat currencies when you see the first signs of bearishness in the market.
Long-term Bitcoin dominance view
Bitcoin dominance is difficult to predict in the long run. While it tends to generally drop over time, no one knows what it will be in 10 years. One may also argue that it didn’t put in a lower low; thus, the culmination point is still ahead of us.
There’s also an argument that as more altcoins are created, they should take the dominance away from Bitcoin. In recent years, it hasn’t been the case really, as minting lots of tokens only caused capital fragmentation and short-lived narratives, and yet, Bitcoin still stands firmly.
Final thoughts
Bitcoin dominance is always disregarded by beginners as just another useless statistic, but unfortunately, in most cases, it ends up as a painful lesson. The thing is to understand what went wrong, get better, and make smarter decisions based on data and not your gut feeling.
Don’t ignore it. Understand. And keep learning. Turn this metric into your edge in the market, because Bitcoin dominance tells you what and why it’s happening.
Resources
If you're interested in diving deeper and expanding your knowledge of Bitcoin dominance, here are some suggestions:
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