Dominance Definition
In the realm of cryptocurrencies and blockchain, dominance refers to the percentage of total market capitalization that a single digital currency like Bitcoin (BTC) or Ethereum (ETH) holds. This term is a measure of how much control a cryptocurrency has over the total crypto market and signifies the influence that a particular coin holds in relation to others.
Dominance Key Points
- Dominance is a measure of a coin’s influence in the entire crypto market.
- It refers to the percentage of the total market cap held by a cryptocurrency.
- Bitcoin historically has had the highest amount of dominance in the crypto market.
- Dominance is frequently used in discussions about market trends and shifts in the cryptocurrency ecosystem.
What is Dominance?
Dominance is a key concept used in understanding financial changes in the crypto world. Think of the entire cryptocurrency market as a pie, where each slice represents a different coin. Dominance is the size of a coin’s slice in relation to the whole pie. The bigger a coin’s market cap, the greater its dominance.
Who Calculates Dominance?
Dominance calculations are performed by cryptocurrency data aggregators and analysts. Websites such as CoinMarketCap.com provide updates on the dominance of different cryptocurrencies as part of their market capitalization data.
Where to Check Dominance?
Dominance can be checked on websites that provide market data on cryptocurrencies. These sites typically have real-time tracking of the market cap of each coin and their dominance percentage. Such sites include CoinMarketCap, Coingecko and CoinPaprika, among others.
Why is Dominance Important?
Dominance is critical as it influences the direction and sentiment of the entire crypto market. Coins with high dominance lead market trends, and when their dominance decreases it often indicates a market shift. A decrease in Bitcoin’s dominance, for example, might suggest a surge in Altcoins, period known as “Altseason”.
How is Dominance Used in Market Analysis?
Dominance is used as an indicator of market behavior. For example, if Bitcoin’s dominance increases, investors may interpret it as a sign that altcoins are losing favor. On the other hand, decreasing Bitcoin dominance may signal an upcoming bull run for smaller altcoins.
Learning to understand and track dominance can help investors and traders gain insights into potential shifts in the cryptocurrency market, thus serving as one of the essential tools for crypto investment strategy development and risk management.
