What is Bitcoin Dominance? Understand DOM to grasp market trends

Question

In the world of cryptocurrencies, Bitcoin Dominance index (, abbreviated as BTC.D or DOM), is one of the most important metrics to assess Bitcoin’s strength relative to altcoins in the market. But what exactly is DOM, and why does it have a decisive influence on your investment strategy?

What is Bitcoin Dominance?

Bitcoin Dominance is simply defined as the percentage of Bitcoin’s market capitalization divided by the total market capitalization of all cryptocurrencies. The calculation formula is very straightforward:

BTC Dominance = (Bitcoin Market Cap / Total Cryptocurrency Market Cap) × 100%

Illustrative example: if Bitcoin has a market cap of $9 billion and all other altcoins combined are $1 billion, then DOM = 9 ÷ (9+1) = 90%. This number reflects Bitcoin’s dominance and its supremacy over other coins.

The DOM index is not static. It fluctuates continuously depending on market sentiment and capital flows. Currently, Bitcoin Dominance is hovering around 55.64%, indicating that Bitcoin remains the “king” of the market but no longer holds absolute dominance as in the early years.

Why is Bitcoin called the “base currency”?

Bitcoin holds an irreplaceable position in the crypto ecosystem. Most investors must buy Bitcoin or USDT before participating in other altcoin projects. When altcoins crash heavily, investors often sell to convert into Bitcoin to preserve capital.

Therefore, Bitcoin’s volatility directly impacts the entire market. When the “king” weakens, the whole kingdom shakes.

Four market scenarios based on the DOM index

In the crypto market, you’ll encounter different situations. Recognizing early which scenario is unfolding will help you adjust your investment strategy:

Scenario 1: Bitcoin rises, the entire market rises accordingly
This is the most ideal situation. Market confidence surges, institutional investors pour capital into both Bitcoin and altcoins. All assets are climbing.

Scenario 2: Bitcoin surges, altcoins decline
Capital flows from altcoins or outside the market into Bitcoin. To avoid heavy losses, many investors sell altcoins and switch to USDT or Bitcoin.

Scenario 3: Bitcoin declines, the market weakens overall
This is the most common scenario. When Bitcoin weakens, the rest of the market suffers even more. Confidence shatters and capital withdraws from everything.

Scenario 4: Bitcoin moves sideways, altcoins increase
During this phase, Bitcoin is consolidating strength for a new rally. Altcoins are capturing investors’ attention. This period can last 1-2 years and is a golden opportunity for promising altcoins.

Important historical milestones of Bitcoin Dominance

2016: Absolute dominance
Bitcoin accounted for over 90% of the market cap. Ethereum was not yet developed strongly, and the crypto market was still Bitcoin’s domain.

2017: ICO boom
In mid-2017, the fundraising craze via ICOs emerged, causing DOM to drop to about 35% — the lowest at that time. Ethereum’s market cap skyrocketed to 30% due to the surging demand for ETH to participate in ICOs.

Late 2017: Bitcoin regains market share
When Bitcoin soared to $20,000, DOM recovered to 65% — the highest until then, showing Bitcoin’s renewed appeal as the “cryptocurrency king.”

January-March 2018: Collapse and capital redistribution
Whales started taking huge profits, shifting funds into altcoins to suppress prices. DOM fell to a low of 33%, marking one of the most volatile periods.

April-July 2018: Partial recovery
DOM rose again to nearly 45% as Bitcoin rebounded from $6,000 to $9,800, but it hadn’t regained its previous dominance.

End of 2018: Loss of confidence
Bitcoin experienced a disastrous plunge, shaking retail investors’ confidence. However, DOM remained around 50% thanks to long-term holders.

2020-2021: Strong comeback
After dropping to $3,800 in March 2020, Bitcoin began a recovery journey. In early 2021, Bitcoin surged to $41,000, pushing DOM up close to 74% — the highest in years. This event shows that when Bitcoin is strong, it can dominate the entire market.

What to do when BTC Dominance increases?

When DOM rises, it indicates capital is shifting from altcoins into Bitcoin. This phenomenon can be combined with various scenarios:

DOM rising + Bitcoin price rising:
A strong market confidence signal. Traders will sell altcoins to buy Bitcoin, expecting profits or waiting for further institutional investment.

DOM rising + Bitcoin price falling:
Dangerous! Altcoins will decline even more. To avoid heavy losses, many sell and switch to USDT to hold.

DOM falling + Bitcoin price rising:
All altcoins increase, often more than Bitcoin. This is a chance for projects to “break out” and even outperform BTC in returns (but very rare).

DOM falling + Bitcoin price falling:
Monitor capital flows carefully. Initially, altcoins will decline along with Bitcoin, but they may rebound later due to buying interest from investors waiting for lower prices.

When DOM increases, your investment strategy should focus on:

High-quality altcoins with solid products
Long-term holding rather than chasing short-term price swings
Avoid buying at peak prices, seek reasonable entry points
Projects with potential to “wake up” even when DOM is high

Other related indicators not to overlook

Besides Bitcoin Dominance, you should also monitor:

TOTAL: Total market capitalization
TOTAL2: Total market cap of all altcoins (excluding Bitcoin)
DEFI.D: Market cap ratio of DeFi projects
USDT.D: Market cap ratio of USDT

These indicators require practical experience and a deep understanding of capital flows. Many new investors often get overwhelmed when entering the market without understanding the interaction among these metrics.

In summary, Bitcoin Dominance is not just a static number but a dynamic indicator reflecting market sentiment, strategy, and capital movement. Mastering how to read and apply DOM will help you make smarter investment decisions.