What is Bitcoin dominance? I get asked that a lot. Actually, it's a super important indicator when analyzing the cryptocurrency market.

To put it simply, dominance refers to the percentage of Bitcoin's market capitalization relative to the total market capitalization of all cryptocurrencies. In other words, it shows how much influence BTC has within the entire market. It used to be around 60-70%, but now it hovers around 57%.

The calculation is also straightforward. Just divide Bitcoin's market cap by the total market cap of all cryptocurrencies. For example, if BTC is worth $90 billion and the other altcoins total $10 billion, then 90 ÷ 100 = 90%.

Why is this so important? Because Bitcoin is the "benchmark currency" of the crypto market. Most market participants first buy BTC or USDT. Even when altcoins crash, they often move their assets into BTC to protect their holdings. So, by watching the movements in dominance, you can gauge the overall market trend.

Generally, four scenarios tend to occur in the market. The first is the best-case scenario where both BTC and the overall market rise together. This happens when big corporations and institutional investors pour in funds. The second is when BTC rises but altcoins fall; this indicates capital flowing from altcoins into BTC. The third is when BTC drops and the entire market declines—like a king falling ill, causing his ministers to panic. The fourth is when BTC stays flat or declines, but altcoins rise; this could signal the start of a new altcoin rally.

When dominance increases, funds gradually shift from altcoins into BTC. This makes it harder for strong altcoins to grow. However, projects with fair valuation and truly good products can still grow during these times.

Looking at history, in 2016, BTC accounted for over 90% of the market cap. 2017 was interesting—mid-year during the ICO boom, dominance dropped to a low of 35%. That was when demand for ETH exploded, pushing Ethereum’s share to 30%. But by the end of 2017, BTC dominance had rebounded to over 65%. Early 2018 saw a sharp drop to 33%, as whales took profits and shifted into altcoins. The subsequent decline was steep. During the COVID-19 crash in March 2020, BTC dipped briefly but then recovered, rising from $3,800 to $41,000 between late 2020 and early 2021. At that time, dominance surged close to 74%.

If you want to follow market trends, you need to understand what dominance is and constantly monitor this indicator. Combining BTC dominance movements with price trends helps you see which direction the overall market is heading.

However, it’s not just about dominance; you also need to look at TOTAL, TOTAL2, DeFi indexes, and others. Doing so requires practical experience and a sense for capital flows. That’s where beginners often stumble.