BTC dominance can directly impact altcoins by measuring the market’s trading volume in BTC vs. altcoins. Bitcoin (BTC) is both the most valuable and the most widely traded cryptocurrency in the world in terms of market capitalization and trading volume. Considering that all cryptocurrencies are traded against Bitcoin and that Bitcoin’s dominance can be used as a useful indicator in trading all cryptocurrencies, these factors are quite significant.
How does BTC dominance affect altcoins?
The dominance of BTC can directly affect altcoins since it shows how much of the market’s trading volume is in BTC compared to how much is in altcoins.
When Bitcoin dominance is up, traders recommend that you hold more of your crypto holdings in BTC than in altcoins. Traders recommend holding more altcoins than Bitcoin if BTC dominance is down.
How to trade Bitcoin dominance?
Multiple factors must be taken into account when trying to trade bitcoin dominance. First, understand that Bitcoin dominance can decrease if interest is high in even one altcoin. It doesn’t follow that every altcoin will have upward trends due to this interest. It may take time for the market to correct itself.
It’s also wise to consider the purpose of some popular altcoins and whether or not that purpose will translate into a lasting effect on the altcoin market. For example, a stablecoin may experience a significant increase in volume at the moment.
However, users might buy a stable coin simply to convert those funds over to BTC since stablecoins are often used as an onramp into crypto.
What happens when Bitcoin dips?
During Bitcoin’s price dip, users might be shifting funds away from BTC into other altcoins, but a price dip could also have little to do with dominance as a whole. If the dominance of Bitcoin decreases, users might expect an altcoin bull run, and they can trade accordingly.
The impact of a Bitcoin (BTC)crash on the crypto market
Despite Bitcoin’s dominance, a significant Bitcoin price crash has historically often led to a market crash, though few exceptions exist. The correlation between Bitcoin and a market crash is simply a function of Bitcoin being the first cryptocurrency and all crypto assets trading against it.
If a country were to ban Bitcoin and the price dropped significantly as a result, traders and speculators might lose confidence in altcoins as well, and pull their funds from them. In fact, as time passes and altcoins break into the mainstream consciousness, future Bitcoin crashes may have less and less impact on the overall market. Because Bitcoin remains the most popular cryptocurrency in the world, dominance matters now. As other coins begin to take this mantra away from Bitcoin, dominance will matter less and less.