Dominance

Dominance in crypto markets is the share of the total value of all cryptocurrencies that belongs to a single asset. Without qualification it almost always means Bitcoin dominance: the market capitalization of Bitcoin (BTC) divided by the combined market capitalization of all tracked cryptocurrencies, expressed as a percentage. The same calculation is applied to other assets, giving Ether dominance or stablecoin dominance.

Traders and analysts use dominance as a rough gauge of where money is flowing within the crypto market. A rising Bitcoin dominance is generally read as investors favouring the largest, most established asset; a falling one as money moving into altcoins. The figure is published by price aggregators and charting platforms, and is not an official statistic.

Imagine a shopping centre where one large department store takes up a big part of all the floor space. If smaller shops open and grow quickly, the department store's share of the centre shrinks even if it has not got any smaller itself. If the small shops close, its share grows again.

Bitcoin dominance measures how much of the crypto "shopping centre" Bitcoin occupies. A change in the number can come from Bitcoin rising or falling, or from everything else rising or falling, which is why it needs to be read with care.

Bitcoin dominance is calculated as:

• $D_{\text{BTC}}$ is Bitcoin dominance, in per cent.
• $\text{MC}_{\text{BTC}}$ is Bitcoin's market capitalization: its price multiplied by the number of coins in circulation.
• $\text{MC}_{\text{total}}$ is the combined market capitalization of all cryptocurrencies that the data provider tracks.

Worked example, using round illustrative numbers: if Bitcoin's market capitalization is $1.2 trillion and the whole crypto market is worth $2.0 trillion, then $D_{\text{BTC}} = 1.2 \div 2.0 \times 100 = 60$. Bitcoin dominance is 60%. If altcoins then rise by $0.4 trillion while Bitcoin stays flat, the total becomes $2.4 trillion and dominance falls to $1.2 \div 2.4 \times 100 = 50$, even though Bitcoin's own value has not changed. This is why analysts usually look at dominance together with Bitcoin's price and the total market value, rather than reading it alone.

For most of the years before 2017, Bitcoin made up the large majority of the crypto market, usually well over 80%, because few other tokens had meaningful value. That changed during the initial coin offering (ICO) boom. As Ethereum (ETH), XRP and thousands of new tokens surged, Bitcoin dominance fell to its lowest level on record in early January 2018, in the mid-30s per cent by most data providers' counts, near the peak of that crypto bubble.

In the bear market that followed, many altcoins fell further than Bitcoin, and dominance recovered. The pattern repeated in later cycles: dominance tends to fall when speculative interest in altcoins, meme coins and new sectors is high, and to rise when investors become cautious. The approval of US spot bitcoin exchange-traded funds in January 2024 added a channel of demand specific to Bitcoin.

• Altcoin season. A sustained fall in Bitcoin dominance during a bull market is often described as "altcoin season", when smaller tokens outperform.
• Risk appetite. Because Bitcoin is the most liquid crypto asset, rising dominance during falls is read as a move towards relative safety, much as investors switch from risk-on assets to risk-off assets in traditional markets.
• Stablecoin dominance. The combined share of stablecoins such as Tether (USDT) rises when investors sell tokens for dollar-pegged coins, so it is watched as a measure of money waiting on the sidelines.
• Ether rivalry. Commentators also track the ratio between Ether and Bitcoin; slang such as the Flappening describes one asset overtaking another by market value.

Dominance depends entirely on the data provider's list of tracked assets. Adding thousands of thinly traded tokens raises the total and lowers Bitcoin's share, even if those tokens have little real liquidity. Market capitalization itself can be overstated for tokens with small free floats, where a few trades at high prices value the whole supply; using fully diluted valuation (FDV) instead gives different figures again. Stablecoins are included by some providers and excluded by others, which matters because their value rises when other prices fall.

Dominance is also not a measure of use or security. Activity measures such as daily active addresses, fees or the hashrate securing the network tell different stories. Supporters of Bitcoin, sometimes called Bitcoin maximalists, cite rising dominance as vindication, while others treat the figure as one rough indicator of market mood among many.

• Bitcoin.org