How to use BTC dominance to trade crypto
Bitcoin is the very first and most noteworthy cryptocurrency in the world when it comes to market share as well as trading volume. However, Altcoins is directly affected by the dominance of BTC, when displaying the market’s trading volume in BTC vs Altcoins. These aspects are quite significant, considering that all cryptocurrencies traded against Bitcoin and Bitcoin’s supremacy can actually serve as an important indicator when trading all different types of cryptocurrencies.
This blog will offer an understanding of how to trade cryptocurrency while utilizing the Bitcoin dominance indicator and how to read the Bitcoin dominance index chart.
How Altcoin is affected by BTC dominance?
The altcoins are directly affected by BTC dominance, as it exhibits the amount of the market’s trading volume is in BTC favor vs how much of the trading volume is in Altcoin’s favor.
Normally, it is recommended that investors have more holding on crypto in BTC than Altcoins, when Bitcoin shows upward trends. However, when BTC dominance is shrinking, traders recommend one holds more Altcoins than Bitcoin.
But it is wrong to say Bitcoin dominance is an exact representation of the share market because bull markets might lead to lower BTC dominance but the funds are might surge in the Altcoins at the same time.
How to trade Bitcoin using this Dominance
There are several constants that are considered when attempting to trade Bitcoin. The most important factor needs to understand that when interest is high in even one Altcoin that means Bitcoin dominance can go down. However, this does not mean that every Altcoin will experience an upward trend. The market will take some time to correct itself.
The user might invest unstable coins simply to move those funds over to Bitcoin, as stablecoins are an easy way to raise funds into the cryptocurrency. As a result of this, bitcoin’s dominance could sharply drop, impacting short-term trades negatively. The fear of missing out (FOMO) is another factor that could lead to unpredictable drops and a rise in Bitcoin dominance.
What happens when Bitcoin plunges?
Bitcoin’s price dip could mean a decline in dominance, as the users move funds away from BTC into other Altcoins. If Bitcoin dominance drops, users might expect an Altcoin bull can run and users might trade accordingly.
Bitcoin crash impact on the crypto market
A crucial Bitcoin price crash leads to the overall market crash, though few exceptions exist. This relation between Bitcoin and the market exists because Bitcoin is the world’s first cryptocurrency and all crypto assets trade against it.
In other words, if a country bans Bitcoin the resulting price drops significantly, this also impacts the Altcoins because investors might lose confidence in Altcoins and full their investment from these alternatives also.
Bitcoin dominance matters because it’s still the most popular cryptocurrency in the world. If another alternative begins to take that mantra away from Bitcoin, the matter of Bitcoin’s dominance is diminishing soon.