The Bitcoin dominance chart is a graphical representation of the relative market capitalization of Bitcoin compared to other cryptocurrencies. It is expressed as a percentage and is calculated by dividing the market capitalization of Bitcoin by the total market capitalization of all cryptocurrencies. The chart shows the proportion of the overall cryptocurrency market that is made up of Bitcoin.
From TradingView
Bitcoin dominance is often used as an indicator to assess the strength and performance of Bitcoin in the cryptocurrency market. It can provide insights into the sentiment of cryptocurrency investors and traders towards Bitcoin compared to other cryptocurrencies.
When Bitcoin dominance is high, it indicates that Bitcoin is performing well compared to other cryptocurrencies and is capturing a larger share of the overall market. This may suggest that investors have higher confidence in Bitcoin as a store of value or as a preferred investment choice, and it may also indicate a trend of capital flowing into Bitcoin.
On the other hand, when Bitcoin dominance is low, it suggests that other cryptocurrencies are gaining popularity and capturing a larger share of the overall market. This may indicate a trend of capital flowing out of Bitcoin and into other cryptocurrencies, which could potentially signal a shift in investor sentiment or a change in market dynamics.
Traders and investors may use the Bitcoin dominance chart as one of many tools to forecast price action. For example, a decrease in Bitcoin dominance could indicate that altcoins (other cryptocurrencies besides Bitcoin) are gaining traction, and this may suggest a potential bullish trend for altcoins. Conversely, an increase in Bitcoin dominance could suggest that Bitcoin is gaining strength relative to other cryptocurrencies, and this may indicate a potential bullish trend for Bitcoin.
However, it's important to note that Bitcoin dominance alone may not be a reliable predictor of price action, as cryptocurrency markets are complex and influenced by various factors such as market sentiment, technological developments, regulatory changes, and macroeconomic conditions.
Therefore, it's essential to use Bitcoin dominance in conjunction with other technical and fundamental analysis tools to make informed trading or investment decisions.
The Bitcoin dominance chart can be found here:
Do you keep an eye on Bitcoin dominance?
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