Introduction to Bitcoin Dominance

Market Meditations | October 12, 2021

Do you ever get that feeling of déjà vu? When you’re pretty sure you’ve seen something like this play out before? Crypto sites are abuzz with expectation of a big Bitcoin move in the near term, but which way could it go? Market cycles are not an exact science, especially as whales can move the price at will. But here are some interesting metrics to keep an eye on:
  • Bitcoin Dominance (BTC.D) is a metric that measures the ratio of Bitcoin’s market capitalisation (price x number of BTC in market) to that of the rest of the crypto market.
  • Historically, BTC.D has trended:
    • Downwards during the long, slow build-up when a new bull market forms, with money entering into both BTC and altcoins;
    • Upwards during the parabolic phase of the bull run;
    • Downwards around the peak of the bull run and just after
  • A pivot point in BTC.D is where it either tops or bottoms, and could indicate a change in the phase of the cycle. It indicates that market participants are moving their money around, otherwise known as capital rotation.
  • ETH/BTC is an alternative metric that indicates how Ethereum, and as a proxy how altcoins, are doing compared to Bitcoin. It is inversely correlated to BTC.D and can also be used to identify pivot points.
  • Previously, money rotating out of BTC at its peak delayed the peak of Ethereum and other altcoins by a few weeks. Profits from Bitcoin are rolled into other large-caps first, followed by mid-caps and then low-caps, before the cycle repeats.
Want to know more? This blog post does a good job of visually showing the relationship between BTC.D and altcoins. And to learn more about capital rotation and money flow check out our Crypto Cycle Guide.