Dominance

Understanding Market Cap

This notion of Dominance is largely tied to the concept of market cap. The market cap refers to the total value of a certain cryptocurrency that's currently in circulation. It's calculated by multiplying the number of coins or tokens in circulation by its current market price. Hence, if a cryptocurrency has more of its coins in circulation and these coins have a higher price, it will have a bigger market cap.

Bitcoin Dominance

Bitcoin is often referred to as a dominant cryptocurrency. This is because it was the very first cryptocurrency and still holds the largest market cap compared to others. But the dominance of Bitcoin isn’t merely due to it being the largest by market cap; it also represents how much influence it has over other cryptocurrencies.

Interpretation of Dominance in Cryptocurrency

Some use Dominance as a way to gauge the market's sentiment towards Bitcoin or other top cryptocurrencies. For instance, when Bitcoin dominance is high, it suggests that the market confidence in Bitcoin is high compared to other cryptos. Conversely, if Bitcoin's dominance is low, it may indicate that traders are moving towards altcoins (or alternative cryptocurrencies).

Factors that affect Dominance

• Market sentiment – Positive or negative news can affect how much a cryptocurrency is bought or sold.
• Regulations – Government regulations can greatly affect a cryptocurrency's dominance.
• Innovation – If a cryptocurrency introduces new successful features, it could increase in value and hence dominance.
• Adoption – The more a cryptocurrency is accepted and used, the more likely it is to have a higher dominance.

Why is Dominance (Bitcoin Dominance) Important?

Dominance gives traders a good overview of the sentiment in the current market, helping them to decide their investment strategies. If Bitcoin dominance is high, traders may choose to invest in Bitcoin. If altcoin dominance is high, it may be a better time to invest in altcoins.