How Is Bitcoin Dominance Calculated?

Bitcoin dominance is calculated using a simple formula:

Bitcoin Market Cap ÷ Total Cryptocurrency Market Cap

Bitcoin market capitalisation is calculated by multiplying the current price value and available circulating Bitcoins. Every digital asset forms part of the total cryptocurrency market cap that encompasses and Tether, as well as lesser-known altcoins.

The total market cap calculation includes different tokens among different data platforms thereby causing minor discrepancies in final results although the calculation method remains simple.

The market capitalisation quantifies Bitcoin dominance rather than using trading volumes or prices independently. Through this technique, you can achieve focus on investing capital within the general cryptocurrency market.

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A Brief History of Bitcoin Dominance

When Bitcoin launched in 2009, it held 100% market dominance as the only cryptocurrency in existence. This monopoly continued for several years until alternative cryptocurrencies began emerging.

By 2013, Bitcoin's dominance started declining as early altcoins like Litecoin gained traction. However, BTC dominance remained above 90% for most of Bitcoin's early years. The landscape shifted dramatically in 2017 during the initial coin offering (ICO) boom, when Bitcoin dominance dropped to around 37% as thousands of new tokens flooded the market.

Since then, the Bitcoin dominance chart has shown cyclical patterns, typically ranging between 40% and 70%. These fluctuations reflect changing investor sentiment, the launch of major altcoin projects, and broader market cycles. Notable events like the 2020-2021 DeFi (Decentralised Finance) surge and subsequent market corrections have all left their mark on the Bitcoin dominance percentage over time.

How To Read the Bitcoin Dominance Chart

Bitcoin dominance displays market cap data as a percentage of the total capital. Watching the Bitcoin dominance chart provides insight into the shifting market confidence that exists between Bitcoin and other cryptocurrencies in the industry.

Interpreting a Rising Dominance Trend

Let’s start with what it means when Bitcoin dominance begins to climb. This upward trend can reflect a number of important shifts in market behavior:

• When Bitcoin dominance rises in the market, it demonstrates investors choosing to reinvest their capital in Bitcoin.

• The decrease in Bitcoin dominance demonstrates market participants’ wait-and-see approach, which leads to withdrawal from altcoins.

Some observers associate falling Bitcoin dominance with a market correction preparation since investors consider Bitcoin a secure investment.

Interpreting a Falling Dominance Trend

Now, let’s explore the other side of the chart: when Bitcoin dominance declines. This downward movement often reveals a different set of market dynamics:

• The downward pattern of Bitcoin dominance indicates that investors choose to invest in alternative cryptocurrencies known as altcoins.

• Investors tend to take advantage of rising volatility and seek higher returns through this market phase, which is known to be bullish.

• The market signals point toward the start of altcoin season, when alternative coins show superior performance over Bitcoin.

By tracking these patterns, you can better time your market entries and exits and understand broader investor behavior.

What Influences Bitcoin Dominance?

Bitcoin dominance can be affected by a variety of factors, both internal to the crypto market and external in the global economy.

1. Market Conditions and Investor Behavior

In risk-off environments (like during economic uncertainty), investors may favour Bitcoin over altcoins. Conversely, in risk-on periods, speculative capital flows into altcoins, reducing Bitcoin dominance.

2. Launches and Performance of Altcoins

Major Ethereum upgrades, meme coin rallies, or NFT booms can capture attention and dilute Bitcoin’s share. New token listings on exchanges often cause capital rotation away from BTC.

3. Regulatory and Economic Factors

The distribution of capital shifts according to governmental regulatory standards and SEC operations as well as news stemming from prominent cryptocurrency jurisdictions. Marketwide economic factors such as inflation rates and interest rates directly impact investor interest levels for different investments.

Why Does Bitcoin Dominance Matter to Investors?

For investors in Singapore and globally, tracking BTC dominance provides crucial insights for portfolio management and strategic decision-making. The Bitcoin dominance chart acts as a market sentiment gauge that helps investors understand where capital is flowing within the cryptocurrency ecosystem.

• Timing Market Cycles: The Bitcoin dominance percentage historically follows cyclical patterns that correlate with broader crypto market phases. High BTC dominance often marks the beginning or end of major market cycles, while low dominance typically occurs mid-bull run when altcoin speculation peaks. Singaporean investors can use these patterns to adjust their portfolio allocations strategically.

• Risk Assessment: The Bitcoin dominance index serves as a risk indicator. Rising dominance may suggest investors are reducing risk exposure, while falling dominance indicates increased appetite for speculative altcoin investments. This helps Singapore-based traders gauge overall market sentiment and adjust their risk management accordingly.

• Portfolio Rebalancing Signals: By monitoring BTC dominance vs. altcoins, investors can identify opportune moments to rebalance between Bitcoin and alternative cryptocurrencies. For instance, historically low Bitcoin dominance percentages have sometimes preceded market corrections, signaling potential times to increase Bitcoin allocations.
  

Bitcoin Dominance vs. Altcoin Season

Altcoin season refers to a period when altcoins significantly outperform Bitcoin. This often happens when Bitcoin dominance drops below key thresholds (commonly around 50%).

In these cycles, capital rotates from Bitcoin into smaller-cap assets, fueling short-term surges in price. Altcoin seasons tend to follow strong Bitcoin bull runs once BTC’s growth stabilizes.

Historically, falling Bitcoin dominance has aligned with major altcoin rallies — such as in 2017 and 2021. However, these patterns are not guaranteed.

While BTC dominance is a helpful guide, it should be used alongside other indicators (like volume, trend strength, and market cap of individual altcoins).

What Are the Limitations of BTC Dominance?

While the BTC dominance chart provides valuable market insights, investors should understand its limitations and consider additional factors when making investment decisions.

Stablecoin Distortion

One significant limitation is how stablecoins affect the calculation. Stablecoins like USDT, USDC, and BUSD often represent a substantial portion of total crypto market capitalisation, sometimes exceeding 10-15%. Since these tokens are pegged to fiat currencies and don't experience the same volatility as Bitcoin or altcoins, their inclusion can distort the Bitcoin dominance percentage. 

When stablecoin market caps grow during uncertain periods, they artificially reduce BTC dominance without reflecting actual investment shifts between Bitcoin and other cryptocurrencies.

DeFi Token Complexity

The rise of liquidity pool tokens, and governance tokens that complicate market cap calculations. For example, represents Bitcoin value but is counted separately in total market cap calculations, potentially understating Bitcoin's true dominance. 

Similarly, the same capital can be counted multiple times across different DeFi protocols, inflating the total market cap and reducing the Bitcoin dominance index artificially.

Memecoin Volatility

Memecoins and speculative tokens can experience explosive but temporary market cap growth that dramatically impacts the Bitcoin dominance chart in the short term. When a memecoin suddenly achieves a multi-billion dollar valuation, it can cause BTC dominance to drop rapidly, even though this capital hasn't actually left Bitcoin. These movements often reverse quickly, making short-term Bitcoin dominance percentage fluctuations potentially misleading.

Liquidity Concerns

Market capitalisation assumes all tokens could be sold at current prices, which isn't realistic for many altcoins with limited liquidity. Some projects have large market caps but thin order books, meaning the actual tradeable value is much lower than market cap suggests. This discrepancy means the Bitcoin dominance index may not accurately reflect the true distribution of liquid, investable capital across the crypto market.

Not Price-Indicative

A declining BTC dominance percentage doesn't necessarily mean Bitcoin's price is falling, it simply means other cryptocurrencies are growing faster as a proportion of total market value. Bitcoin's price can rise significantly while its dominance falls if altcoins rise even more rapidly.

Missing Context on Market Health

The BTC dominance metric alone doesn't indicate whether the overall crypto market is healthy or in decline. Both Bitcoin and altcoins can lose value simultaneously while dominance remains stable or shifts dramatically during periods of stagnant total market cap.

For these reasons, Singapore investors should use the Bitcoin dominance chart alongside other metrics like trading volume, total market capitalisation, Bitcoin's price action, and fundamental analysis when developing comprehensive crypto investment strategies.

How To Use Bitcoin Dominance in Your Crypto Strategy

Understanding how to practically apply Bitcoin dominance analysis can significantly enhance your cryptocurrency investment approach. Here are actionable strategies for incorporating the BTC dominance metric into your trading decisions.

1. Rotation Strategy

Monitor the Bitcoin dominance chart to time rotations between Bitcoin and altcoins. When BTC dominance reaches historical highs, consider gradually allocating a portion of your portfolio toward quality altcoins, anticipating a potential altcoin season. Conversely, when the Bitcoin dominance percentage drops to historical lows, consider rotating some altcoin profits back into Bitcoin before a potential market correction.

Example: When Bitcoin's market share is high (around 70%), it's a signal to take 20% of your Bitcoin and buy a few major altcoins like Ethereum or Solana. This prepares your portfolio for the likely upcoming altcoin season where they see bigger gains.

2. Divergence Signal

Look for divergences between Bitcoin's price and the Bitcoin dominance index. If Bitcoin's price is rising while BTC dominance is falling, it indicates strong overall market momentum with altcoins outperforming. This scenario often presents opportunities in the altcoin market. However, if Bitcoin's price is falling while dominance is rising, it signals a "flight to safety" and may indicate broader market weakness — a defensive positioning period.

Example: If Bitcoin hits a new price record but the dominance metric drops from 55% to 48%, it tells you that altcoins are the leading performers. Investors can look at allocating  buying altcoins during this period.

3. Risk Management Approach

Use BTC dominance vs. altcoins as a risk gauge for portfolio allocation. Maintain a higher Bitcoin allocation (60-70% of crypto holdings) when dominance is rising or at elevated levels, as this suggests market caution. Increase altcoin exposure (up to 40-50% of crypto holdings) when dominance is falling and market sentiment is bullish.

Example: If Bitcoin's market share is high (over 60%), a smart investor keeps their portfolio 70% in Bitcoin and 30% in altcoins. If the dominance falls below 50%, they adjust to a 50/50 split, increasing their exposure to altcoins for higher returns while still keeping Bitcoin as the stable foundation.

4. Cycle-Based Approach

Combine the Bitcoin dominance chart with broader market cycle analysis. In early bull markets when BTC dominance is high, focus primarily on Bitcoin accumulation. As the bull market matures and dominance begins declining, gradually diversify into established altcoins. In late bull markets when dominance reaches multi-year lows, consider taking profits and increasing stablecoin allocations to prepare for potential corrections.

Example: After a major market event like the (when dominance is high), you might hold 80% Bitcoin. As the market matures and dominance falls to 40%, you start selling small amounts of Bitcoin to buy high-quality altcoins. When dominance gets extremely low (e.g., 35%), it's a signal to lock in profits across the board and wait for the next cycle.

5. Sector Rotation Method

When the Bitcoin dominance percentage is falling, analyse which altcoin sectors are leading the decline. If DeFi tokens are driving dominance lower, allocate to DeFi projects. If layer-1 blockchains are outperforming, focus there. This sector-specific approach helps you invest in the strongest areas rather than randomly selecting altcoins.

Example: An investor sees that BTC dominance is declining. They check the market and notice that tokens related to AI and Big Data are suddenly surging and driving the dominance down. They then invest specifically in leading AI-related crypto projects, skipping over sectors that aren't performing as well.

Pro tip for Singapore investors: When using these strategies on platforms like Gemini Singapore, set up alerts for key BTC dominance levels (such as 45%, 55%, and 65%) to trigger strategy reviews. Always maintain appropriate position sizing and never invest more than you can afford to lose in volatile altcoin positions.

Wrapping Up

serves as a market sentiment indicator that shows Bitcoin’s portion within the entire crypto market capitalisation. The metric shows us how capital moves between different digital assets regardless of its direction of movement.

The Bitcoin dominance chart provides valuable insights when you learn how to interpret it, understanding its related factors while acknowledging its constraints.

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