I see many newcomers in crypto often get confused about an indicator called DOM or BTC Dominance. What is it? Why is it so important? Today, I will share my experience about this indicator.

What is Dominance? Simply put, it is the market capitalization ratio of Bitcoin compared to the entire cryptocurrency market. For example, if Bitcoin has a market cap of 9 billion USD and all altcoins combined only 1 billion USD, then BTC Dominance will be 90%. That means Bitcoin accounts for 90% of the total market value.

Why do I care about it? Because Bitcoin is the "king" of crypto. It is what most people buy first, or use USDT to enter the market. When Bitcoin is strong, everything else is also strong. But when Bitcoin weakens, all altcoins will bleed.

Currently, Bitcoin's dominance is around 41%, lower than in previous years. This means altcoins are taking up a larger share of the total market cap.

The crypto market usually follows 4 main scenarios. First, Bitcoin rises and pulls the entire market up — this is the most ideal situation, when market confidence is high. Second, Bitcoin rises but altcoins fall — during this time, funds only flow into Bitcoin. Third, Bitcoin falls and drags the whole market down — this is the most common scenario, because when "the king is sick," the entire kingdom wavers. Fourth, Bitcoin moves sideways or slightly down, while altcoins increase — this indicates Bitcoin is gathering strength for a new rally.

Now, what should you do when dominance increases? When DOM rises and Bitcoin's price surges, market confidence grows, and traders sell altcoins to buy Bitcoin. At this point, altcoins find it hard to rise, but quality projects with strong fundamentals and real products may break out. You should buy and hold good altcoins, avoid chasing high prices.

If DOM increases but Bitcoin decreases, altcoins will fall even harder. Many investors will switch entirely to USDT to avoid losses.

Conversely, when DOM decreases and Bitcoin rises, most altcoins will increase more than Bitcoin. This is when small projects have a chance to break out.

Looking back at history, in 2016 when Bitcoin was under $100, it accounted for over 90% of the market cap because Ethereum didn't exist yet. 2017 was a turning point when ICOs exploded, and DOM dropped to 35%, the lowest at that time, because people bought ETH to participate in ICOs. At the end of 2017, when Bitcoin hit $20,000, DOM recovered to 65%. Early 2018, as whales took profits and shifted into altcoins, DOM fell to 33%, the lowest in history. 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 plummeted, but DOM stayed around 50%. In early 2019, DOM hovered around 50-55% as investors gradually regained confidence. In 2020, when Bitcoin crashed from $3,800 and then surged to $41,000 at year's end, DOM spiked close to 74%.

The key is that you must always monitor dominance if you want to catch market trends. Besides, there are also indicators like TOTAL, TOTAL2, DEFI, USDT.D, etc. That’s why newcomers often get wrecked — because they don’t understand the flow of money within the market.