Why the BTC market share is worth following: Key indicators that traders must know

If you often engage in short-term trading on exchanges, you should have heard the term “BTC dominance.” Simply put, BTC dominance measures the percentage of Bitcoin's market capitalization relative to the entire crypto market. As of the latest data, BTC's market share is stable at 54.97%, with a circulating market capitalization of $1758.58B.

Why is this indicator so important? Because it can help you determine market cycles, predict capital flows, and even adjust your investment portfolio.

How to Calculate BTC Dominance

The calculation method is very straightforward:

BTC Dominance = Bitcoin Market Capitalization ÷ Total Crypto Market Capitalization

The market capitalization of Bitcoin is derived from the current price × total amount of BTC mined. This number changes daily, depending on the price fluctuations of BTC and the total value of the entire crypto market.

Why BTC's Dominance Fluctuates

1. The Impact of the Altcoin Wave

Before the explosion of altcoins, Bitcoin once accounted for over 90% of the market. However, with the rise of public chains like Ethereum and Solana, as well as the prosperity of the NFT, GameFi, and DeFi ecosystems, funds began to disperse.

Now, the use of altcoins far exceeds that of Bitcoin—beyond transfers, they also delve into multiple fields such as gaming, art, and finance. When the market focus shifts to a certain type of altcoin (such as during the NFT craze), the dominant position of BTC will significantly decline.

But don't forget that the high volatility of altcoins is a double-edged sword. Although the risks are high, many traders are looking to profit from this volatility.

2. The performance of bull markets and bear markets is different

During a bear market: Investors tend to shift their funds into stablecoins to protect their principal, which leads to a decline in BTC's dominance. Stablecoins are pegged to fiat currencies or precious metals, making them a choice for risk avoidance.

During a Bull Market: The situation reverses. When the market is favorable, traders convert stablecoins into higher-risk assets with greater profit potential—this could be Bitcoin or more volatile altcoins, depending on market sentiment.

3. The role of stablecoins is becoming increasingly important.

Stablecoins have become an important infrastructure in the crypto market. Many fiat trading pairs on spot exchanges are limited, but crypto-to-crypto trading pairs are usually more abundant. Traders often first exchange their funds into stablecoins before entering other coin markets.

When a large amount of new funds enters the market through stablecoins instead of BTC, Bitcoin's dominance will inevitably decline—but this isn't necessarily a bad thing; it may instead signal that the market is expanding.

4. The Impact of New Coin Listings

Whenever a popular new coin is launched, market attention and capital flow will shift towards them. BTC needs to compete for market share with all other coins, so the influx of new coins often suppresses BTC's dominance. However, this kind of hype is usually fleeting, and after the frenzy subsides, capital will flow back to BTC or completely exit the market.

How to Use BTC Dominance to Guide Trading

Application of the Vayikoff Method

The Wyckoff Method is a classic trading theory developed in the 1930s, used to identify market trends and reversal points. Its core idea is that market movements are divided into four phases:

1. Accumulation Period — Large holders quietly build positions
2. Bull Market — Price breakout, retail investors follow suit
3. Distribution Period — Large Holder Sell-off
4. Downtrend Period — Price Correction

Many professional traders use this method to determine the turning points of BTC's dominance, thereby deciding whether to increase their BTC holdings or switch to altcoins.

Identify “Shanzhai Season”

When BTC's dominance continues to decline, it usually indicates the onset of “altcoin season”—a period when altcoins perform better than Bitcoin. During this phase, funds flow from BTC to other coins. Smart traders will monitor changes in BTC's dominance and adjust their positions in a timely manner to seize opportunities during altcoin season.

BTC price + dominant dual signals

Experienced traders not only look at BTC prices but also assess BTC's dominance and read market signals:

• Price ↑ + Dominance ↑ → Bitcoin bull market, funds flowing into BTC
• Price ↑ + Dominance ↓ → Altcoin bull market, funds flowing into other coins
• Price ↓ + Dominance ↑ → Altcoin bear market, funds flowing back to BTC
• Price ↓ + Dominance ↓ → Overall bear market, capital outflow from the crypto market

These signals are not 100% accurate, but historical data shows that they have considerable reference value.

Conclusion

The dominance of BTC is a key indicator for understanding the cycles of the crypto market. Whether you are a short-term trader or a long-term investor, regularly monitoring this data can help you better grasp the market rhythm and optimize asset allocation.

But remember: BTC dominance is just a reference indicator, not a holy grail. It can help you plan your trading strategy, but it cannot guarantee any profits. Rational analysis and risk management are the true foundations of stable profits.