Why are we even discussing Bitcoin's 'dominance'?
I've noticed that Bitcoin dominance can be a confusing measurement for OGs and newcomers alike, so I thought I'd break down MY INTERPRETATION here to help anyone looking to learn about how it works.
The FIRST thing that needs to be said is: this metric is BULLSHIT. Crypto market caps can be fabricated into the billions $$ (as we've seen with stuff like FTT, LUNA, and everything else), which artificially inflate the total crypto market cap's "value" relative to Bitcoin's market cap.
Bitcoin has 99.9% of the "dominance" of the real market. The money market. The market that matters.
Crypto is like the after hours poker table in the basement of a single financial building sitting in NYC. Bitcoin is New York, and much, much larger.
Despite this metric being nonsense, that doesn't mean there isn't any value in what you can read from it.
Let's take a look at the Bitcoin dominance (BTC.D) chart:
Starting at the top left corner, what do you notice? Bitcoin dominance was hovering around 95% -- up until 2017. Weird nerd coins LTC DOGE XRP etc. floated around not really knowing their place, scamming people, doing the usual things altcoins do.
Then ponzi platforms like Ethereum emerged, and crypto found its niche -- satisfying the easy-money minds living through peak fiat financialization.
Shitcoins have flooded the market since the 2017 bull market. It's become easier and easier to spawn altcoins out of thin air over time. Kind of -- exactly -- like how fiat works.
So, now you have two honeypots in this cross-contaminated "cryptocurrency" mess.
Bitcoin - the pure, sweet, raw honey, hand-delivered by the bees of Zeus, Dionysus, and Aphrodite themselves.
Crypto - The expired leftovers that spilled out the bottle and've been crusting to the shelf in your kitchen cabinet, leaving a sticky, annoying mess.
For reasons beyond me, though, people love expired honey. It's like crack.
What's followed is: humans have messed up, as they do, and decided to start mixing the honeypots together.
The Chart
Bitcoin dominance (BTC.D), as it's discussed today, represents the flow of honey between Bitcoin's market cap and the total market cap of altcoins, including stablecoins.
Yes, that includes Do Kwon's $18 billion UST (at one point).
You get the point as to why this metric is bullshit.
However, measuring Bitcoin dominance without stablecoins provides a bit better of a signal than just BTC.D.
When I take them out, look at how it alters the chart:
Bitcoin "dominates" 62% of the "market" without stablecoins (aka sideliners) right now.
What Matters
What doesn't matter? Bitcoin's perceived "dominance" over la la land.
What does matter is what this dance of money between each honeypot can tell us about the market.
Understand that BTC.D can RISE from TWO things happening:
- Bitcoin's market cap rises _faster _ than the altcoins' are. BTC/USD is outrunning the market.
- Bitcoin's market cap drops slower than the altcoins' are. ALTs/USD are falling faster than BTC/USD.
BTC.D can FALL from TWO things happening:
- Bitcoin's market cap rises _slower _ than the altcoins' are. ALTs/USD are outrunning BTC/USD.
- Bitcoin's market cap drops faster than the altcoins' are. BTC/USD is falling faster than the rest of the market.
What's interesting about this ispsychology.
Train your intuition and think of the reasons behind why Bitcoin dominance may be rising or falling.
Consider the context:
- Prices - high or low?
- Sentiment - bearish or bullish?
- Emotions - Fear or greed?
- Macro environment - Are we in QE or QT? Recent black swans? Daddy Powell??
So, what to do with all this information?
My advice:
Ignore everything I just said, fuck off and build a Bitcoin citadel.