Author: 0xEdwardyw
Bitcoin Dominance is a measure of Bitcoin's share of the entire cryptocurrency market. In simple terms, it represents the percentage of Bitcoin's market value in the total market value of all crypto assets. For example, if the total market value of the entire crypto market is $1 trillion, and Bitcoin's market value is $600 billion, then Bitcoin's market value share is 60%. This ratio can be understood as Bitcoin's "market share" in the entire crypto market.
The changes in Bitcoin's market value share are often used to observe the dominant force in the market. When this ratio is high or continues to rise, it means that Bitcoin is outperforming other crypto assets. It may be that Bitcoin's price is rising faster, or it may be that altcoins are falling, or both. This is often interpreted as "Bitcoin is outperforming the overall market."
On the contrary, when the market capitalization of Bitcoin is low or continues to decline, it means that the overall increase of altcoins exceeds that of Bitcoin, that is, altcoins are gradually "eating away" Bitcoin's market share.
In the early stages of the development of cryptocurrency, Bitcoin was almost the only encrypted asset, so its market capitalization accounted for nearly 100% at one time. However, with the emergence of thousands of altcoins in recent years, Bitcoin's market share has naturally been diluted. Today, Bitcoin's market capitalization share fluctuates within a dynamic range, becoming an important reference indicator for investors and analysts to judge market trends and risk preferences.
Source: https://www.tradingview.com/markets/cryptocurrencies/dominance/
Altcoin Season refers to a period of time when altcoins (that is, all cryptocurrencies except Bitcoin) outperform Bitcoin as a whole. During this period, the gains (in percentage terms) of many altcoins often exceed those of Bitcoin, showing a collective surge. Traders often jokingly say that "altcoin season is here", meaning that all their non-Bitcoin assets are rising sharply.
Altcoin season is usually accompanied by the rise in market enthusiasm and the further flow of funds from Bitcoin to other crypto assets. A typical altcoin season often occurs during a bull market, when investors, after making certain gains on Bitcoin, begin to turn to small and medium-sized currencies to seek higher return potential.
The market capitalization share of Bitcoin essentially reflects the strength of Bitcoin relative to other assets in the entire crypto market, so it shows a certain inverse relationship with the overall performance of altcoins. Understanding this relationship will help you better interpret the impact that changes in market capitalization share may have on your portfolio:
When Bitcoin's market capitalization share rises, it usually means that Bitcoin's price performance is better than most altcoins. Sometimes it is because Bitcoin's price has risen sharply, and altcoins cannot keep up; sometimes Bitcoin is sideways or slightly down, but altcoins fall even worse. In either case, the result is that Bitcoin's market capitalization share of the entire market has increased.
When Bitcoin's market capitalization share decreases, it means that altcoins as a whole have outperformed Bitcoin. This usually happens when altcoins are generally rising: Bitcoin may rise slowly while altcoins rise sharply; or Bitcoin may go sideways or even fall slightly, while some altcoins still rise or fall less. Especially when the market capitalization share drops sharply (for example, it falls below 50% or even 40%), it is often a typical signal of "altcoin season". Several rounds of large altcoin market movements in history have been accompanied by a significant decline in Bitcoin's market capitalization share.
However, it should be emphasized that the change in market capitalization share should be combined with the overall market state. Not all "declines in share" are good for altcoins. Sometimes, the decline in share is just because Bitcoin is falling, but other crypto assets are also falling, but they are falling less. In this case, although the share has dropped, the market as a whole is in a bear market, and it is not a true "altcoin season".
The most ideal altcoin season often occurs when Bitcoin prices are relatively stable or rising slowly, while altcoins rise sharply. In this case, the market as a whole is growing, and altcoins account for a larger part of the increase, resulting in a decline in Bitcoin's share.
On the contrary, if Bitcoin's market capitalization share declines in the overall market decline (for example, Bitcoin falls, but some funds flow into stablecoins, causing Bitcoin's market capitalization share to decline), it is not a carnival for altcoins, but a bear market signal that the entire market is in a risk-averse state.
A more intuitive way to understand this relationship is to observe the synchronous changes in Bitcoin prices and share:
Bitcoin prices rise, and share also rises: Bitcoin leads the market strongly, altcoins perform weakly or have no obvious gains, and Bitcoin is the "protagonist" of the market.
Bitcoin price rises, share falls: classic "altcoin season" signal. Bitcoin rises, but altcoins rise more sharply, and investors begin to chase higher risks and potentially higher returns.
Bitcoin price falls, share rises: market risk aversion increases, altcoins fall more sharply, funds may flow back to Bitcoin, or flow out of the market as a whole. This is usually a bear market signal for altcoins.
Bitcoin price falls, share falls: Bitcoin is weak, even falling faster than altcoins, or funds flow into stablecoins, causing share to fall. This is not a sign of altcoin season, but a manifestation of overall market weakness and widespread risk aversion.
Can Bitcoin's market cap share help predict or predict the arrival of "altcoin season" in advance? Many traders think the answer is yes. Although it is not a universal crystal ball, the trend and key positions of market cap share are often used in conjunction with price trends to determine whether the market is shifting from Bitcoin to altcoins.
A common strategy is to observe extreme values or trend reversals in Bitcoin's market cap share. Altcoin seasons usually start when Bitcoin's market cap share reaches a high point and then begins to decline. The logic behind this is that Bitcoin has experienced a round of strong gains (market cap share climbed), and then the price slowed down, and market funds began to rotate into altcoins, causing Bitcoin's market cap share to fall and altcoin prices to rise collectively.
Another way to use it is to adjust the portfolio allocation in real time. Some traders will dynamically adjust their positions based on the market cap share trend. For example, if Bitcoin's market cap share continues to rise and there is no sign of a decline, they may tend to hold more Bitcoin and be cautious about altcoins. On the contrary, if they observe that the share is sideways at a high level or starts to decline, and the price of Bitcoin remains strong, they may start to deploy high-quality altcoins to position themselves in advance for the altcoin season that may come.
In addition, the relative performance of Ethereum is also an important clue worth paying attention to. As the altcoin with the largest market value, Ethereum's strength often heralds the start of a wider altcoin market. A practical method is to observe the trend chart of the ETH/BTC trading pair, which reflects "how many Bitcoins are worth one Ethereum". When ETH/BTC shows an upward trend, it means that Ethereum is appreciating relative to Bitcoin, and capital is shifting from Bitcoin to altcoins. Traders usually regard the breakthrough or upward trend of ETH/BTC as a leading signal that altcoins are about to outperform Bitcoin comprehensively.
Investors have been arguing for a long time about the safe-haven properties of Bitcoin. Many people believe that Bitcoin is already "digital gold", but more people believe that it exhibits the same high volatility as risky assets, and has a significant correlation with the performance of the Nasdaq at many times, and should be regarded as a risky asset.
If we consider it from the perspective of price, most investors will be confused. But if we change our perspective - from the perspective of market share, and compare it with gold, it is not difficult to find that Bitcoin's safe-haven properties are hidden here. Bitcoin's "safe-haven properties" are not directly reflected in the price, but in the changes in price and market share (that is, "Bitcoin Dominance).
From the perspective of attributes, Bitcoin and gold have the same attribute: "alternative payment system". When the legal currency system fails in certain circumstances (for example, war), gold is a common means of payment for international trade. Bitcoin is also playing this role to some extent. When investors lack confidence in the legal currency system, whether due to inflation or policy uncertainty, many investors will choose to transfer their liquidity from the legal currency system to the "alternative payment system", thereby driving the long-term price increase and market share of gold and Bitcoin (think about the performance of Bitcoin and gold in the past year).
From an investment perspective Look, gold and Bitcoin are the first stop for liquidity to enter during the interest rate cut cycle, and the last stop for liquidity to withdraw during the interest rate hike cycle. At a time when liquidity begins to be released but the financing cost is relatively high, investors tend to invest in assets with better liquidity for risk management reasons, and gold, Bitcoin and index futures are good targets, which has led to an increase in Bitcoin's market share. When liquidity begins to shrink, investors often choose to sell equity assets first, and sell Bitcoin and gold last, which has led to an increase in the market share of Bitcoin and gold in the era of shrinking liquidity.
To sum up, we can see how Bitcoin's safe-haven properties are reflected:
When investors lack confidence in fiat currencies, Bitcoin dominance rises, reflecting its safe-haven properties.
When investors enter the market due to liquidity release, Bitcoin's high liquidity and high potential returns attract investors' preference, and Bitcoin dominance rises, reflecting its safe-haven properties.
When investors withdraw liquidity from the market due to various factors, Bitcoin is often the last to be sold, so its performance is relatively stronger, and Bitcoin dominance rises, reflecting its safe-haven properties.
In addition, if we look at it from the perspective of "volatility of volatility", Bitcoin's safe-haven properties will be even more obvious. "Volatility of volatility", or "sensitivity", is an indicator of how much the volatility level of an asset changes when an event occurs. In the plunge caused by tariffs in April 2025, VIX The index rose rapidly from around 20 to around 60, while the volatility index (DVOL) of Bitcoin only rose from 45 to around 63, showing that Bitcoin is relatively less sensitive than the stock market - and this is an important feature of its safe-haven properties.
Source: Tradingview
So why does Bitcoin perform in sync with Nasdaq at certain moments, but differently from gold? This may be due to the important role of leveraged trading in Bitcoin trading. Leverage for Bitcoin and US stocks is easy to obtain, while leverage for gold is relatively difficult. In an era of abundant liquidity or significant speculative sentiment, investors tend to leverage Bitcoin and stock exposure through derivatives, and driven by leverage, both are somewhat out of touch with fundamentals and perform in sync. However, as leverage is cleared and investors become rational, the different attributes of Bitcoin and stocks become dominant, which is why Bitcoin gradually stabilizes and exhibits safe-haven properties after both fall in sync. Bitcoin leveraged trading brings risks, while Bitcoin itself brings safe-haven.
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