What is Bitcoin dominance?
Bitcoin dominance is simply the percentage of Bitcoin compared to the total value of the entire cryptocurrency market. In other words, it shows how much of the market’s total value is held by Bitcoin.
For instance, if Bitcoin dominance is at 60%, that means Bitcoin makes up 60% of the overall market cap, leaving the other 40% for all the altcoins (alternative coins).
Why Does Bitcoin Dominance Matter?
Since Bitcoin is the first and largest cryptocurrency, its dominance really shapes the entire market. Watching Bitcoin’s dominance can give us clues about where investors are putting their money and how they’re moving between Bitcoin and altcoins.
High Dominance: When Bitcoin dominance is high, it often means investors feel more secure sticking with Bitcoin. This usually happens in uncertain times or when Bitcoin is on the rise. However, if Bitcoin’s price drops, altcoins tend to take a bigger hit.
Low Dominance: On the flip side, if Bitcoin’s dominance decreases, it might indicate that investors are getting excited about altcoins. They might be looking for bigger returns, especially if Bitcoin’s growth slows down. But keep in mind, when Bitcoin starts rising again, altcoins often lag behind as money flows back into Bitcoin.
What is Altseason?
Altseason is the time in crypto when altcoins start to outshine Bitcoin, often with sharp price increases that attract short-term traders and investors.
Why Might Now Not Be the Best Time to Buy Altcoins?
Altcoins can offer those enticing returns that many are after. For instance, if Bitcoin rises from $65k to $100k, you’re looking at less than a 2x return. But if a coin like Arbitrum jumps from its current price to $5, that could mean a 10x return! So, what’s the catch?
Right now, it might not be the best moment to jump into altcoins. Bitcoin is on the upswing, and some altcoins are following, but with high Bitcoin dominance, any dip in Bitcoin’s price can hit the entire market hard. A 5% drop in Bitcoin might lead to altcoins falling by 10-20%. Plus, there’s no guarantee that altcoins will bounce back at the same rate as Bitcoin.
So, what should you do? Should you hold off on buying altcoins? Not necessarily! Building a portfolio for the future is smart, but it’s best to wait for the right entry points. That’s where chart analysis and understanding Bitcoin’s next moves can help.
