Bitcoin Dominance shows how much of the total Crypto Market is wrapped up in Bitcoin as opposed to any other Crypto in the world. The reason why we reference Dominance often is because it tells a compelling tail about where all the money in Crypto is and how spread out investors and traders currently are in the grand scheme of things.
The concept unravels like this:
If a brand new investor enters the market with $1000 and is looking to diversify his portfolio – where does he put his money?
50% to Bitcoin
20% to Ethereum
10% to Litecoin
10% goes to Mid-Caps
10% goes to Shitcoins
Of course, this is just an example. If the market was super bearish on Alts, then the safer bet would be to simply put 100% into Bitcoin. If the market was super hot, then one would put even less into Bitcoin because he would want to play the rest of the market until the market slows down – then they would get into Bitcoin.
What Does This Mean?
Think about it like this:
For every new Dollar that enters the market – 41 cents of that dollar goes to Bitcoin. The other 59% is going to Altcoins. This imbalance can spark what is known as Alt Season. Alt Season means that there is no reason to trade Bitcoin at the current levels, you’re money is best suited for Altcoins. If a flood of money comes out of Bitcoin and into Altcoins, then Altcoins have a chance to do some really special things.
One can imagine sitting on Bitcoin, logging into a trade and buying an Altcoin with their Bitcoin. As this happens more and more, Bitcoin will either drop in value or stay relatively the same. If the value of all Altcoins rise, as to their market caps, then the overall proportion of Bitcoins Marketcap to the entire Market Cap will shrink. When that happens, new money ignores Bitcoin and instead justr buys more Altcoins. This process continues until euphoria sets in and Altcoins start going crazy all over the sphere.
You can see in the chart an area marked in Green. If you follow the Weekly updates you will finally realize why the Dominance chart background is always Green – well, that’s because we are zoomed into an area that has historically been very good for Altcoins. The previous Green area actually encompasses Bitcoins 20K ATH and the Alt Season that continued into January of 2018If this Support is unable to recover and we head towards the next level of Support, we may be able to see a market wide interest in Altcoins that can rival what we have seen earlier in 2021 around May.
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