Bitcoin dominance refers to the percentage of the total cryptocurrency market capitalization that is held by Bitcoin. This metric indicates how dominant Bitcoin is in the cryptocurrency market. The higher the Bitcoin dominance, the more Bitcoin is dominating the market.
How Bitcoin Dominance Affects Altcoins
1. Flow of Funds
During periods of high Bitcoin dominance, investors’ attention is focused on Bitcoin. In this situation, investments in altcoins tend to decrease, and the prices of altcoins tend to decline. Conversely, when Bitcoin dominance decreases, investors start to look at altcoins, and the inflow of funds into altcoins increases.
2. Market Sentiment
Changes in Bitcoin dominance affect the overall market sentiment. When Bitcoin dominance is rising, investors tend to be bullish on Bitcoin. On the other hand, when Bitcoin dominance is declining, investors tend to become bullish on altcoins.
3. Altcoin Price Fluctuations
Changes in Bitcoin dominance directly impact the prices of altcoins. During periods of high Bitcoin dominance, the prices of altcoins tend to decline. Conversely, when Bitcoin dominance decreases, the prices of altcoins tend to rise.
Conclusion
Bitcoin dominance is an important metric for understanding the overall trend of the cryptocurrency market. Changes in Bitcoin dominance have a significant impact on the flow of funds to altcoins, market sentiment, and the prices of altcoins. Investors participating in the cryptocurrency market should monitor the trends in Bitcoin dominance and make appropriate investment decisions.