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What is Bitcoin Dominance: 4 Trading Strategies in Bull & Bear Markets

2021-11-03 10:35:57


  • Bitcoin dominance (BTCD), also called Bitcoin dominance index, represents Bitcoin’s market share in the overall cryptocurrency market.
  • There are 4 trading strategies that can be taken using BTCD as an indicator of crypto market trends.
  • For example, if BTC dominance is growing and Bitcoin price is falling, it could be an altcoin bear market and one can consider selling altcoins.


bitcoin dominance

What is Bitcoin Dominance?

Bitcoin dominance (BTCD), also called Bitcoin dominance index, is the market capitalization of BTC relative to that of all digital assets. In other words, BTCD represents Bitcoin’s market share in the world of cryptocurrencies. 

The basic principle is that if the dominance of BTC increases, the value of altcoins (all other cryptocurrencies including Ethereum) will decrease. And if the dominance of BTC decreases, the value of altcoins will increase.

Anyone who knows anything about cryptocurrency knows that it was born with Satoshi Nakamoto and Bitcoin (BTC) in 2008, with BTC being mined for the first time in 2009. Being the first cryptocurrency, Bitcoin occupied the whole market, and thus had full market dominance.

As time passed and different altcoins began to appear, the essentially unchallenged Bitcoin market dominance began to slip. In 2013, Bitcoin still had a market dominance of 94%, but all this started to change in 2017 as cryptocurrency gained in popularity and the many new initial coin offerings (ICOs) began to increase the sector’s value, or market capitalization (market cap).

In February 2017, Bitcoin dominance (BTCD) was at 85.4%, with Ethereum (ETH) taking 5.7% of the market share and Ripple (XRP) taking the other 1.1%. Four months later, however, BTCD stood at only 40% with liquidity moving to altcoins instead.

Today, there are over 13,000 different cryptocurrency coins and tokens listed on CoinMarketCap, making it difficult for BTC to ever regain those pre-2017 heights again.

This may not necessarily be a bad thing, as some analysts are of the view that a growing altcoin market share is a signal of a maturing market as more participants create a more robust ecosystem.

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How To Calculate Bitcoin Dominance

Bitcoin dominance (%) = BTC market cap ($)/ Total cryptocurrency market cap ($)

For example:

$1,161,096,644,198 / $2,625,952,307,009 = 44.21%

Bitcoin Dominance Chart

You can find the BTC Dominance chart at TradingView. As can be seen from the screengrab below, it provides a good snapshot of how Bitcoin dominance has evolved in the past 5 years.

BTC dominance has fallen below 40% for the second time since then, and stands at an eight-month low. This is in contrast to the previous crypto winter in 2018, when BTC dominance stood strong at 70% as all altcoins including Ethereum collapsed.


btcd chart

Bitcoin dominance chart on TradingView.


How To Use Bitcoin Dominance To Trade

Some investors use Bitcoin dominance or BTCD to inform their trading decisions, as they believe that it sheds light on the overall crypto market trend. While there are no sure-win strategies especially when it comes to something as new and volatile as cryptocurrencies, these can be used as general guidelines:

  • If BTC dominance is growing and Bitcoin price is rising, this could be a Bitcoin bull market. Consider buying Bitcoin.
  • If BTC dominance is growing and Bitcoin price is falling, it could be an altcoin bear market. Consider selling altcoins. 
  • If BTC dominance is shrinking and Bitcoin price is rising, it could be an altcoin bull market. Consider buying altcoins.
  • If BTC dominance is shrinking and Bitcoin price is falling, it could be a bear market for the whole crypto market. Consider taking as much profit as you can off the table. 


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What Is The Flippening? Will Ethereum Merge Finally Trigger It?

The “flippening” is a term used for ETH overtaking BTC. Although perhaps never reaching its pre-2017 heights again, many believed that BTC would remain the dominant crypto.

However, during 2017, with the rise of ETH, opinions started to change as BTCD decreased and Ethereum dominance (ETHD) increased. By June 2017, BTCD had 37.84% of the market and ETHD had 31.17%. It was a close race but BTC held strong.

This may change especially with the impending Ethereum Merge, slated to happen about 10 days from time of writing. If the Merge is successful, the flippening is very likely to happen and may well send ETH prices skyward even in a supposed bear market.

ETH to BTC ratio

ETH/BTC is the ratio of how much Ethereum is worth compared to Bitcoin. The higher the ratio, the more dominant ETH is.

While Bitcoin was created as an alternative type of money to the fiat currencies we currently use, Ethereum provided a platform for various other decentralized applications (DApps), from financial services to gaming, art and infrastructure tooling for the blockchain ecosystem. As such, Bitcoin’s market dominance has decreased over the years as more people know about DApps and altcoins become more widely adopted.

In this TradingView chart, we can see how ETH has increased in dominance compared to BTC over the past year, as anticipation about the Eth 2.0 or the Ethereum Merge climbs.

ethbtc chart

ETHBTC chart on TradingView.

What Is the Flappening?

The “flappening” is a term used for Litecoin (LTC) overtaking Bitcoin Cash (BCH). It is similar to the “flippening” term, which has also been coined for similar situations in the cryptocurrency field. As Litecoin came close to Bitcoin Cash, LTC’s founder Charlie Lee tweeted that LTC would overtake BCH’s market domination in the “flappening.”

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Is Bitcoin Dominance A Good Indicator for the Crypto Market?

Market dominance, and especially Bitcoin dominance, is a great indicator for crypto investors to choose where to allocate their funds, as well as when to invest and when to sell. However, and we cannot emphasize this enough–BTCD cannot be used in isolation. With cryptocurrency gaining status as a newfound asset class among institutional investors, macro factors such as geopolitical instability, interest rate hikes and inflation come into play and should be taken into consideration when making trading decisions as well.

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