I see many of you still have questions about this indicator, so today I will share a detailed explanation of what BTC dominance is and why it’s important for the crypto market.

BTC Dominance, also known as btc.d, DOM, is a specialized index that shows Bitcoin’s market dominance over the entire cryptocurrency market. In other words, it is the percentage of market capitalization that Bitcoin holds compared to the total market capitalization. This index shows you Bitcoin’s relative strength compared to other altcoins. In the past, it reached up to 90%, but now it usually fluctuates around 50-55%.

Calculating BTC dominance is simple. Divide Bitcoin’s market cap by the total market cap of all cryptocurrencies. For example, if Bitcoin’s market cap is $9 billion and all other altcoins combined are only $1 billion, then DOM = 9 / (9 + 1) = 90%. The higher Bitcoin’s market cap compared to other altcoins, the larger this index becomes.

Why is Bitcoin so important? Because it is considered the base currency of the market. Most people wanting to participate in the market first buy Bitcoin or USDT. When altcoins drop sharply, many move their funds into Bitcoin to preserve their capital. That’s why BTC dominance becomes a crucial index to monitor.

In the crypto market, there are usually four main scenarios. First, Bitcoin rises along with the entire market, which is the most ideal scenario when market confidence is strong and big investors pour money into both Bitcoin and altcoins. Second, Bitcoin rises but altcoins fall, meaning funds are flowing only into Bitcoin. Third, Bitcoin drops along with the entire market, which is the most common scenario because when the king is sick, the whole kingdom shakes. Fourth, Bitcoin moves sideways or declines while altcoins still increase, indicating Bitcoin is regaining strength and preparing for a new rally.

When DOM increases and Bitcoin’s price also rises sharply, market confidence is very strong, and investors sell altcoins to buy Bitcoin or institutions inject capital. If DOM increases but Bitcoin’s price drops, altcoins will fall even more, and many people sell USDT to avoid losses. When DOM decreases and Bitcoin’s price rises, most altcoins also increase, sometimes even more than Bitcoin. Conversely, if DOM decreases and Bitcoin also drops, you need to carefully observe capital flows to see how altcoins will react.

But don’t forget that when BTC dominance is high, capital is flowing from altcoins into Bitcoin, making it difficult for altcoins to surge strongly. However, some good projects still prove their potential and break out even surpassing Bitcoin. At that point, you should buy and hold quality altcoins with solid fundamentals and real products, but absolutely avoid buying at too high prices.

Looking back at history, in 2016 when Bitcoin was just below $100, DOM reached over 90% because there weren’t many altcoins yet. In 2017, during the ICO boom, DOM dropped to only 35% as many people bought ETH to participate in fundraising rounds. At the end of 2017, when Bitcoin hit $20,000, DOM recovered to 65%. In January 2018, as whales took profits, DOM dropped to its lowest at 33%. From April to July 2018, DOM rose again to 45% as Bitcoin increased from $6,000 to $9,800. At the end of 2018, Bitcoin plummeted but DOM remained around 50%. 2020 was a turning point, with Bitcoin crashing hard then recovering, from $3,800 to $41,000 by late 2021, when DOM surged close to 74%.

I always recommend paying attention to the DOM index if you want to catch market trends. Additionally, you should consider other indicators like TOTAL, TOTAL2, DEFI, USDT.D, etc. These require practical experience and a feel for capital flow to understand properly, so it’s normal for beginners to struggle at first.