From the Hyobi blog.
01. What is dominance?
How can we find stats like Ethereum dominance or Solana dominance in a cryptocurrency landscape dominated by Bitcoin? And why are there so many dominators? Let’s delve into why crypto dominance is an objective, significant, and relatively straightforward measure to calculate.
Dominance refers to the proportion of a cryptocurrency’s market capitalization in relation to the overall market capitalization, expressed as a percentage. In other words, dominance represents the share of a particular coin compared to the combined value of all other coins. This value can be large, as in the case of Bitcoin, or one hundredth of a percent, like that of lesser-known altcoins.
A quick reminder: To calculate the capitalization of cryptocurrency, multiply the price of one coin by the total number of coins in circulation.
02. Bitcoin dominance
Bitcoin dominance is a widely followed statistic among traders and investors. The peculiarity of this metric is that Bitcoin’s dominance consistently decreases and will likely continue to do so. The chart below illustrates this trend – movements may seem sharp at times, but the overall trajectory is evident.
This phenomenon is attributed to the fact that Bitcoin was the first cryptocurrency, and as other altcoins keep appearing and gaining popularity, Bitcoin’s dominance is gradually diminishing.
Of course, currently Bitcoin remains unmatched by other cryptocurrencies, and it’s hard to say if it will change or not. But you can be sure that in the future, the ongoing creation of new coins and advancements in technology that will find their fans will affect Bitcoin’s dominance.
03. Dominance of other cryptocurrencies
The cryptocurrency market offers a multitude of statistics, each corresponding to the various cryptocurrencies available. Even if you can’t find the dominance of some non-major coin, you can calculate it using the information provided earlier. Alternatively, you can refer to dominance charts for well-known cryptocurrencies such as Ethereum, USDT, XRP, and others.
Often, it might be challenging to see significant fluctuations in the chart of non-Bitcoin dominance. BTC is too massive, and its market capitalization tends to absorb any oscillations in the market share of its smaller counterparts. That’s why there are different types of dominance, excluding Bitcoin’s capitalization or even the top 10 coins’ capitalization. They facilitate the monitoring of potential changes among cryptocurrencies with similar stats.
04. How can investors use dominance
Changes in dominance do not directly correlate with changes on Bitcoin price chart, the same refers to other cryptocurrencies. However, they provide insights into the popularity of a cryptocurrency and potential future trends.
In other words, if Bitcoin dominance decreases, it may be a signal that investors believe more in altcoins and add them to their portfolios more frequently. Consequently, an upward trend in altcoins’ dominance is likely to follow. And if BTC dominance increases, it indicates that investors are on the OG side.
The other example is related to the dominance of stablecoins. Its growth might be an indicator that investors are seeking less risk and opting for more reliable and less volatile options.
But by conducting your own analysis, you can work out the pattern for yourself and make informed conclusions based on the observed dominance dynamics.
This article came directly from the Hyobi Global blog, found on https://blog.huobi.com/2023/08/16/crypto-dominance-all-you-need-to-know/