I often get questions about what dominance is. It’s an important indicator that shows the proportion of Bitcoin in the overall cryptocurrency market, but in reality, many people do not understand it accurately.

Simply put, dominance is the percentage of Bitcoin’s market capitalization relative to the total market capitalization of all cryptocurrencies. For example, if Bitcoin is worth $9 billion and all other altcoins combined are worth $1 billion, the dominance would be 90%. Currently, it’s around 57%, but in the past, it has been in the 60-70% range.

The reason why this is important is that it’s essential for reading the overall market trend. Bitcoin acts like a benchmark currency in the crypto asset market, and most people convert profits from altcoins into Bitcoin or USDT when taking profits. In other words, an increase in dominance indicates that funds are flowing from altcoins into Bitcoin.

There are roughly four scenarios that occur in the market. The first is when Bitcoin and the overall market rise simultaneously. This is the best scenario. The second is when Bitcoin rises but altcoins fall. The third is when Bitcoin falls and the entire market declines. The fourth is when Bitcoin remains flat or declines while altcoins rise.

By understanding what dominance is, you can judge which scenario is happening. When dominance is rising, funds are being pulled out of altcoins, making it harder for altcoins to grow even in a bullish market. Conversely, when dominance is low, it may indicate that attention is shifting to assets other than Bitcoin.

Looking at history is interesting. In 2016, Bitcoin accounted for over 90% of the market cap. Back then, Ethereum was still small. During the ICO boom in 2017, dominance dropped to around 35%. Demand for ETH surged, and Ethereum’s share reached 30%. After that, by the end of 2017, it recovered to over 65%.

In mid-January 2018, during a sharp decline, dominance fell to 33%. During the subsequent correction, it recovered to around 45%. After the COVID-19 shock in March 2020, during the recovery from $3,800 to $41,000, dominance rose close to 74%.

Learning how to interpret dominance makes it much easier to judge market trends. However, it’s also necessary to look at other indicators like TOTAL, TOTAL2, and DeFi index at the same time. That’s where beginners often stumble. Gaining an intuitive sense of capital flow is very important.

Currently, dominance is around 57%. It suggests that investors are gradually regaining confidence in the market. It’s worth paying close attention to what happens from here.