How to Trade Cryptocurrencies Based on Bitcoin Dominance Rate

Bitcoin is the first and most prominent virtual currency in the world when it comes to market capitalization and trading volume. These factors are quite important considering the fact that all coins trade against BTC and its dominance rate can really serve as a valuable indicator when it comes to trading different cryptocurrencies. .

This post will provide detailed information on how to trade cryptocurrencies while using the BTC dominance indicator and how to read the BTC dominance indicator chart in general.

What is Bitcoin dominance rate chart?

Bitcoin dominance is calculated by comparing the market capitalization of Bitcoin with the capitalization of the entire cryptocurrency market. The higher the market capitalization of Bitcoin, the more dominant Bitcoin is and we get the answer to the question: What percentage of the virtual currency market is Bitcoin?

Bitcoin Dominance Rate Formula: Bitcoin Dominance Rate = Bitcoin Market Cap / Total Cryptocurrency Market Cap.

The BTC dominance chart on TradingView shows this indicator in a percentage format, for example 40% or 60%.

In addition, users can also view the real dominance of BTC by calculating the ratio of BTC dominance against PoW coins that have the goal of becoming a form of money.

The logic of Bitcoin’s real dominance index is that many altcoins like stablecoins are not intended to compete with Bitcoin and thus the metric may paint a more realistic long-term view of BTC dominance.

This indicator even gives users the option to exclude ETH, as many are debating whether it is a currency or a utility token?

How does Bitcoin dominance affect altcoins?

BTC dominance can directly affect altcoins, as it shows how much the BTC market’s trading volume compares to altcoin trading volume.

In general, if Bitcoin dominance increases, traders recommend holding more BTC than altcoins and vice versa.

While it is wrong to say that Bitcoin dominance is an accurate representation of a bear market or a bull market, there are correlations between these definitions. For example, a bull market can lead to a lower BTC dominance rate, as money often flows into altcoins during that time.

In contrast, bear markets often see higher BTC dominance, as traders pull money out of altcoins and into Bitcoin as it is a more reliable asset.

Some enthusiasts argue that a lower Bitcoin dominance rate is a good thing, as it means the market is expanding and more money is flowing through all types of projects instead of just Bitcoin. However, it is also important to note that the total cryptocurrency market capitalization also counts the value of pre-mines and forks, meaning that the number of altcoins can be artificially inflated.

In addition, it should also be considered that Bitcoin’s dominance rate could decrease even as the price of the asset increases. This comes as money is pouring into the cryptocurrency market including Bitcoin, although more money is flowing into altcoins than the world’s largest virtual currency.

While Bitcoin’s dominance rate may paint the cryptocurrency market in a certain way at the surface level, there are various factors to consider for an informed view.

Sometimes dominance drops due to a short-term altcoin boom or money flowing out of the entire market. It is best to do more research before deciding to invest.

How to trade based on Bitcoin’s rate system value?

There are many factors to consider when trying to trade against Bitcoin’s system value. First, understand that Bitcoin’s proportional system value can drop when only one altcoin is of particular interest. This interest in a single altcoin does not mean that all altcoins will grow. The market may take some time to adjust automatically.

At the same time, it’s also a good idea to look closely at the purpose of some popular altcoins and whether that purpose could translate into a lasting impact on the altcoin market. For example, we can see a stablecoin with a significant increase in volume for the time being.

However, users investing in the aforementioned stablecoins are simply transferring those funds to Bitcoin, as stablecoins are an easy way to transfer funds into the virtual currency company.

Due to this action, the value system of BTC can quickly decelerate and recover, acting negatively to the short duration of the transaction. Another factor that can make Bitcoin’s proportional value fall or rise unreservedly in the short term is fear (FOMO).

New coins are constantly entering the virtual currency market. Some of these new altcoins entered the market creating hundreds of thousands of dollars-style attacks running into altcoins and disproportionately devaluing Bitcoin’s exchange rate system.

However, many new altcoin projects often lose their vigor or even end up being a scam, causing users to withdraw as quickly as they put in. In that case, the proportional system value of BTC may return to the original position.

Also look at the pole ratio. For example, the rate used to be higher than 90% before altcoins entered the market. However, enthusiasts of BTC’s systematic store of value did not expect it to reach the number of times again as the popular variable of altcoins in today’s market. However, it cannot be said with certainty that if the countries that follow El Salvador implement BTC as legal currency, its systemic value could increase many times over.

In fact, Bitcoin’s systemic value is more likely to reach a new low as a new high as altcoin projects continue to become popular worldwide.

Therefore, traders should take note when Bitcoin’s proportional system value tends to reach all-time highs, as that project marks the distance. On the contrary, users should keep an eye on the last metric and how the altcoin market is responding.

What happens when Bitcoin drops in price?

A Bitcoin price drop means a decrease in value to the proportional system, in which users transfer funds from BTC to other altcoins, but the drop in price can also have little to do with the overall system value. If the value of the system of Bitcoin goes down, the user that sure can be expecting altcoins to rise and trade accordingly.

Bitcoin’s symbolic rate system value

Overall, Bitcoin could drop in price if users withdraw from all cryptocurrencies, resulting in a lower total virtual market cap. In this case, Bitcoin’s system value remains at a certain rate, despite traders’ predictions of a pandas function.

This example is a necessary reminder that the trader should not use the Bitcoin exchange rate system value as the sole tool, but rather one of many to check before making a trade.

Photo of Bitcoin crash for virtual money field

Ignoring the rate system value, Bitcoin’s historical decline in value usually comes when the entire market collapses, although there are some field exceptions. The correlation between Bitcoin and the school crash is simply because Bitcoin is the world’s first virtual currency and all cryptocurrencies trade with it.

For example, if a country sees the work of banning Bitcoin and results in a significant drop in value, fundamental traders and investors may also lose confidence in altcoins and withdraw from these alternative investments.

However, a Bitcoin crash does not always mean a market crash. There are many cases where Bitcoin drops in value while ETH remains more stable. It is important to remember that different assets serve different goals and the downtrend of these assets may not be compatible with the downtrend of different assets.

In fact, over the coming years, as altcoins enter the mainstream, the latter’s Bitcoin crash will have less and less of an impact on the overall market. The system value of Bitcoin is very important today as it is still the most virtual currency in the world. If other coins start removing that from Bitcoin, the Rate System Value will get lower and lower.

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