The question “What is dominance?” is asked so often—really, quite frequently. The truth is, this is an extremely important indicator for understanding the cryptocurrency market.

BTC dominance (DOM) is simply the proportion of Bitcoin’s share of the total market capitalization of the entire crypto market. It currently hovers around about 57%, though at one point it reached 60% to 70%. With just this single number, you can start to see the overall direction of the market.

Dominance is like a mirror of market sentiment: when this figure is high versus when it is low, investor behavior patterns are completely different. The calculation method is also straightforward—you just divide Bitcoin’s market capitalization by the total market capitalization of all cryptocurrencies. For example, if Bitcoin has a market cap of $9 billion and all other altcoins together are $1 billion, then 90 ÷ (90 + 10) = 90%.

Bitcoin is the flagship, base currency of the crypto market. Many traders, when they first enter the market, buy Bitcoin or USDT; and when altcoins crash, they move funds to protect their positions—or flee into Bitcoin. In other words, when dominance is rising, it means funds are gradually being pulled out of the altcoin market.

There are four major scenarios that play out in the market. The first is when Bitcoin’s price rises and the whole market rises along with it. This is the most ideal situation: market confidence increases, and institutional investors are channeling large amounts of money into the market. The second scenario is when only Bitcoin rises while altcoins decline. This is the typical pattern when dominance is increasing. The third scenario is when both Bitcoin and altcoins fall together—this indicates that the entire market is in a bearish mood. The fourth scenario is when Bitcoin is moving sideways or falling, but altcoins are rising. In this case, dominance may be decreasing, and the altcoin market could be moving independently.

Dominance works as an indicator because it’s essential for judging market trends. When DOM is rising, bullish traders tend to sell altcoins and buy Bitcoin; in bearish phases, they “run” into USDT (a stablecoin) to avoid losses. Conversely, when dominance is falling, altcoins generally tend to show stronger price action than Bitcoin.

Looking back historically, in 2016, Bitcoin accounted for more than 90% of market capitalization. Back then, even Ethereum didn’t exist. Then, during the ICO boom in 2017, dominance dropped to a low of about 35%. There was also a period when Ethereum’s share reached 30%. After that, by the end of 2017, dominance recovered to 65% or more—overlapping with the time when Bitcoin peaked at $20,000.

From January to February 2018, dominance plummeted, falling to around 33%. After that, once the sharks (large investors) locked in profits and switched into altcoins, the entire market declined significantly. By mid-2018, dominance recovered to nearly 45%, but then fell again in the second half of the year. Afterward, as of April 2019, it was hovering around 50% to 55%.

More recently, during the COVID-19 crash in March 2020, Bitcoin’s price dropped sharply—but the subsequent recovery was intense. From late 2020 into early 2021, when Bitcoin surged from $3,800 to $41,000, dominance also rose to nearly 74%.

You shouldn’t judge dominance on its own; you need to look at other indicators as well. Consider TOTAL (the total market cap of all cryptocurrencies), TOTAL2 (the total market cap excluding Bitcoin), and DeFi-related metrics as references too. You need a “feel” for reading market capital flows—and that’s exactly where beginners tend to stumble.

In conclusion, when dominance is rising, it’s wise to carefully select and hold altcoins that are highly regarded and have proven themselves. It’s important not to chase prices blindly, but to make decisions by reading the overall market flow.