I receive quite a few questions about what BTC dominance is and how it impacts the market. Today, I will try to explain this important indicator more clearly to everyone.

BTC Dominance (btc.d or DOM) basically represents the percentage of Bitcoin in the total market capitalization of all cryptocurrencies. It shows us Bitcoin's dominance compared to other altcoins. The calculation is very simple: Bitcoin's market cap divided by the total market cap. For example, if Bitcoin's market cap is $9 billion and all altcoins combined are $1 billion, then DOM = 90%.

Currently, BTC DOM is fluctuating around 55-56%, but in the past, it has reached 70-80% or dropped to only 33-35%, depending on the market phase. Bitcoin is considered the "base currency," so most people have to go through BTC or USDT if they want to enter the crypto market, or convert from altcoins to Bitcoin to preserve their capital.

In the market, there are usually four main scenarios. The first is Bitcoin rising and pulling the whole market up — this is the ideal scenario, when confidence is strong, and large capital flows into both Bitcoin and altcoins. The second is Bitcoin rising but altcoins falling — at this point, capital from altcoins or outside flows into Bitcoin. The third is Bitcoin falling and dragging the entire market down — this common scenario occurs because Bitcoin is the "king," and when the king weakens, the entire empire wobbles. The fourth is Bitcoin moving sideways or slightly down, while altcoins stay flat or rise — this is when Bitcoin is gaining strength, preparing for a new altcoin rally.

When BTC DOM increases and Bitcoin's price surges, it signals that market confidence is returning strongly, and traders are selling altcoins to buy Bitcoin. Conversely, when DOM rises but Bitcoin's price drops, altcoins will fall even more, and many investors will choose to sell to USDT to avoid losses. When DOM decreases and Bitcoin's price rises, most altcoins also increase, often more strongly than Bitcoin. And when DOM drops and Bitcoin also declines, you need to monitor capital flow — altcoins may fall but then rebound higher than before the drop.

The history of DOM is quite interesting. In 2016, when Bitcoin was below $100, DOM rose above 90% because there were no significant altcoins yet. 2017 was a turning point — BTC entered a strong rally, and in mid-year, ICOs exploded, causing DOM to drop to just 35%, the lowest at that time, as people rushed to buy ETH for ICO participation. At the end of 2017, when Bitcoin hit $20,000, DOM recovered to 65%. Early 2018, DOM fell to 33% as whales took profits, shifted into altcoins, then sold off altcoins, creating a historic decline. From April to July 2018, DOM rose again to 45% thanks to positive news from SEC and the rally from $6,000 to $9,800. At the end of 2018, Bitcoin dropped sharply, but DOM stayed around 50%. In April 2019, DOM was at 50-55% as investors gradually regained confidence. By March 2020, Bitcoin crashed hard and then recovered, from $3,800 to $41,000 at the end of 2020, with DOM surging close to 74%.

When DOM increases, capital from altcoins gradually flows into Bitcoin, making it hard for altcoins to rally strongly. However, some promising projects still outperform and break out more than Bitcoin. At this point, you should buy and hold good-rated altcoins with solid products, but absolutely avoid chasing overpriced ones.

Besides BTC DOM, you should also monitor other indicators like TOTAL, TOTAL2, DEFI index, USDT.D. This requires real trading experience and a good sense of actual capital flow. That’s why beginners often get wrecked!