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BTC.D: How To Prepare for the Potential ALT Season Cycle
Hello traders. Here I would like to discuss how the Bitcoin dominance works in theory and technically. Why it exists, how it functions, and how we can interpret it in terms of when a potential alt season cycle is coming.
Calculating BTC dominance is actually, very straightforward and simple to use for your advantage when trying to understand when to enter alt coins. The best way to understand how alt seasons work is we need to understand the percentage of the total market cap of Bitcoin is taking up the space against all other coins, hence, Bitcoin Dominance. Let's imagine Bitcoin's market cap is currently $100 billion (Bitcoin + all other coins combined = total market cap).
If $60 billion is represented by Bitcoin alone, Bitcoin's dominance be at only 60%. But what constitutes Bitcoin dominance as being strong? It depends. The market currently flushes and enters everyday, so it is purely relevant. Long ago, we could've said that a 90% Bitcoin dominance was strong. But for current reference, we are around 60% for the Bitcoin dominance, and with every 4-5% plus or minus, can be a substantial move for the cash flow within the coin market cycle.
The first real major shift in Bitcoin Dominance started back when we had our first altcoin season back in 2017-2018 (before, during, and after the well know 'ICO phase'). In February of that year, BTC dominance stood at 85.4% (ETH had a 5.7% share of the cryptocurrency market cap, while Ripple's XRP was on 1.1%.). This is now changing with new coins entering the market on a weekly and monthly basis - and especially after the whole DEFI hype has entered the space.
In the course of those small short months of the first altcoin season, Bitcoin's market share percentage plunged dramatically as a spate of initial coin offerings (ICOs) boosted the industry's market capitalization substantially. By June, BTC dominance had fallen to just 40% — with liquidity moving to ERC-20 tokens instead. CoinMarketCap data shows that, over the same period, total market capitalization in USD soared from $20 billion to $114 billion — a 470% increase.
Bitcoin prices crashed after the first bull run in 2017, and by January 2018, Bitcoin's dominance was resting at an all-time low of 32.8% as the first real known bear market by the general public came into play. Unfortunately, the alt season was officially over too, with many first-time investors losing substantial amounts of money as ICO projects vanished into thin air, where many people have liquidated their profits/losses back into the USD.
After the 2017-2018 crash, Bitcoin dominance returned to some extent — hitting highs of 70% in September 2019. However, it's unlikely that we'll see BTC punch through this level ever again just due to the fact that the cryptocurrency space is growing at even a faster, alarming rate.
The General Understanding and how to interpret Bitcoin Dominance:
Again, very simple. Bitcoin dominance (as indicated by the first box), we are seeing Bitcoin Dominance (1W chart) now facing extreme resistance. What happens at resistance by theory? It should fall. What does this mean for Bitcoin? Bitcoin's market share value in terms of percentage should also fall. What does this mean for alt coins? Alt coins should go up!
It's as simple as that.
Calculating BTC dominance is actually, very straightforward and simple to use for your advantage when trying to understand when to enter alt coins. The best way to understand how alt seasons work is we need to understand the percentage of the total market cap of Bitcoin is taking up the space against all other coins, hence, Bitcoin Dominance. Let's imagine Bitcoin's market cap is currently $100 billion (Bitcoin + all other coins combined = total market cap).
If $60 billion is represented by Bitcoin alone, Bitcoin's dominance be at only 60%. But what constitutes Bitcoin dominance as being strong? It depends. The market currently flushes and enters everyday, so it is purely relevant. Long ago, we could've said that a 90% Bitcoin dominance was strong. But for current reference, we are around 60% for the Bitcoin dominance, and with every 4-5% plus or minus, can be a substantial move for the cash flow within the coin market cycle.
The first real major shift in Bitcoin Dominance started back when we had our first altcoin season back in 2017-2018 (before, during, and after the well know 'ICO phase'). In February of that year, BTC dominance stood at 85.4% (ETH had a 5.7% share of the cryptocurrency market cap, while Ripple's XRP was on 1.1%.). This is now changing with new coins entering the market on a weekly and monthly basis - and especially after the whole DEFI hype has entered the space.
In the course of those small short months of the first altcoin season, Bitcoin's market share percentage plunged dramatically as a spate of initial coin offerings (ICOs) boosted the industry's market capitalization substantially. By June, BTC dominance had fallen to just 40% — with liquidity moving to ERC-20 tokens instead. CoinMarketCap data shows that, over the same period, total market capitalization in USD soared from $20 billion to $114 billion — a 470% increase.
Bitcoin prices crashed after the first bull run in 2017, and by January 2018, Bitcoin's dominance was resting at an all-time low of 32.8% as the first real known bear market by the general public came into play. Unfortunately, the alt season was officially over too, with many first-time investors losing substantial amounts of money as ICO projects vanished into thin air, where many people have liquidated their profits/losses back into the USD.
After the 2017-2018 crash, Bitcoin dominance returned to some extent — hitting highs of 70% in September 2019. However, it's unlikely that we'll see BTC punch through this level ever again just due to the fact that the cryptocurrency space is growing at even a faster, alarming rate.
The General Understanding and how to interpret Bitcoin Dominance:
Again, very simple. Bitcoin dominance (as indicated by the first box), we are seeing Bitcoin Dominance (1W chart) now facing extreme resistance. What happens at resistance by theory? It should fall. What does this mean for Bitcoin? Bitcoin's market share value in terms of percentage should also fall. What does this mean for alt coins? Alt coins should go up!
It's as simple as that.
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