BTC dominance analysis
What is BTC.D?
BTC dominance is a ratio that measures the market capitalisation of bitcoin (the largest digital asset by market cap) against that of all other cryptocurrencies, or altcoins. It's a ratio calculated by taking the market cap of BTC and dividing it by the market cap of all other altcoins.
Why is it helpful?
BTC.D can be a helpful indicator to predict up coming market trends and can be used in combination with a variety of indicators but it looses its value if used in isolation.
BTC.D Monthly
BTC.D Monthly:
A monthly chart represents a high time frame therefore we are looking for any movements to progress over 4 months and more. When BTC.D increases in percentage points it means that liquidity is being poured into BTC far more than into alt coins thus meaning BTC.D increases.
BTC dominance used to be far higher but as more alt coins have emerged BTC.D has declined. BTC.D is meeting resistance around the 50% mark and I do not expect BTC.D to exceed 52%. However, BTC does what BTC wants to do so it could reach 60% at its peak but his would mean ALT coins are going to take a serious beating. When BTC.D is rising it is safer to only invest in BTC (not financial advice).
Alternatively, when BTC.D is declined it means the value of the ALT coin market is increasing therefore expect gains in any alt coins you may hold.
On the monthly, there is a greater possibility of a move to the downside than the upside. This could happen in a few of ways
Investors selling BTC and buying alts
Investors buying comparatively more alts than BTC
However, that’s not to say that BTC can’t move to the upside, which could happen in a couple of way
Investors buying comparatively more BTC than ALTs
Investors trading ALTs for BTC
BTC.D Weekly chart
The BTC.D weekly chart shows the trading range since April 2021 to April 2023 between 40% - 48%. We can also see the RSI is oversold therefore signalling a pullback.
If BTC continues to gain marketshare we can see strong resistance at 52% - 54% and then at 57%- 60% so, if BTC.D reaches these levels we can expect a pull back and for ALTs to make significant gains.
BTC.D daily chart
The daily chart shows a divergence on the RSI because BTC.D has increased where as the RSI has been showing lower highs. This divergence is another signal of a move to the downside for BTC.D. What is not clear is to what level and for how long. The fibonacci 50% tool on the daily shows that 44% is a key support level meaning, if the BTC.D pulls back and closes above the 44% level then BTC.D cold continue to take market share. If this happens then crypto investors money is safer in BTC than in any ALTs.