How to track Bitcoin dominance: a practical guide for traders

Why the BTC Dominance Chart Is the Main Analysis Tool

If you take cryptocurrency trading seriously, you already know: Bitcoin is the king of the market. Today, its share accounts for 56.34% of the total capitalization, which means one thing — BTC movements set the tone for the entire crypto market. But how do you understand when the altcoin rally will start? The answer is simple: you need to monitor the dominance index.

What Happens When BTC Dominance Falls

Imagine a simple logic: when investors become more aggressive and seek more volatile assets, they move capital out of Bitcoin into Ethereum, Solana, and other altcoins. At this moment, the dominance index begins to decline. This is a signal that the market is entering the so-called altcoin season — a period when alternative digital assets grow much faster than BTC.

The opposite situation: high dominance indicates investor caution. They prefer safety and minimize risk by moving funds into the most reliable asset — Bitcoin. This often happens during market downturns when a safety cushion is needed.

How This Indicator Is Calculated

The formula is simple but effective. Take BTC’s market capitalization and divide it by the total market capitalization of all cryptocurrencies, then multiply by 100%. For example, if BTC is worth 1920 billion dollars and the entire crypto market is 3.4 trillion, then the dominance is approximately 56%.

However, there is also a narrower calculation — real dominance. Here, only cryptocurrencies with proof-of-work consensus mechanisms are compared: Bitcoin, Litecoin, Dogecoin, and Bitcoin Cash. This provides a more accurate picture of BTC’s influence among similar assets.

Historical Context: Why Did Dominance Drop from 100%

When Bitcoin first appeared, it was the only cryptocurrency on the market — accordingly, the dominance index was 100%. But after Ethereum launched in 2015, the situation changed dramatically. Thousands of altcoins emerged, each claiming its niche. Gradually, BTC’s share decreased, but it was never displaced by any competitor.

What Factors Influence Fluctuations in the Index

Altcoin volatility is the main driver. If Ethereum’s price drops faster than Bitcoin’s, BTC dominance automatically increases. Conversely: a surge in Solana or a new L2 network can significantly reduce the dominance index.

Stablecoins also play a role. When the market panics, capital moves not only into BTC but also into USDT, USDC, BUSD. These assets gain weight in the total capitalization, and Bitcoin’s share decreases accordingly.

How Traders Use the Dominance Chart in Trading

On the TradingView platform, you will find the BTCDOM index. It shows the dominance chart in real time. Experienced traders look at this data to determine the optimal moment for portfolio rotation.

The strategy is simple: when dominance reaches historical highs, it signals overbought conditions for Bitcoin and a possible reversal in favor of altcoins. Conversely, lows in dominance often precede a BTC rally.

You can also trade the index itself via futures BTCDOM/USDT on major exchanges. This allows you to speculate on investor preferences without directly buying cryptocurrencies.

Why Market Capitalization and Dominance Move in Different Directions

There is an interesting paradox: when the dominance index rises, the overall market capitalization of the crypto market often falls. This happens because, during times of uncertainty, investors withdraw money from speculative altcoins, reducing the total volume. But when dominance falls, it often signals a market boom — capital will flow into alternative assets, and total capitalization will grow.

Where to Check Current Data

Besides TradingView, the index is available on CoinMarketCap. There you will also find historical charts, trend analysis, and analyst forecasts. The data is updated in real time, so you will always be aware of the current market situation.

Should You Rely Only on BTC Dominance

Short answer: no. It is a powerful tool but only one of many. Use it together with technical analysis, on-chain metrics, and fundamental analysis of specific projects.

Moreover, new altcoins and promising protocols are constantly emerging. Every new rally reshapes the market structure. Bitcoin remains at the top, but its share will continue to fluctuate. The key is to correctly interpret signals from the dominance chart and not ignore other indicators.