Bitcoin dominance is one number: Bitcoin's market capitalization divided by the market capitalization of every crypto asset added together. Nothing else is in it. It is not a measure of how much Bitcoin is being bought, how many people hold it, or how the price is doing. It gets quoted constantly because it is the shortest way to say whether money is concentrating in the oldest asset or spreading into everything else. That is a real thing worth watching. It is also, on its own, ambiguous in a way almost nobody says
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The plain description
Bitcoin dominance is one number: Bitcoin's market capitalization divided by the market capitalization of every crypto asset added together. Nothing else is in it. It is not a measure of how much Bitcoin is being bought, how many people hold it, or how the price is doing.
It gets quoted constantly because it is the shortest way to say whether money is concentrating in the oldest asset or spreading into everything else. That is a real thing worth watching. It is also, on its own, ambiguous in a way almost nobody says out loud.
Stated so you could reproduce it
Bitcoin market cap divided by total crypto market cap, times 100. Market cap is price multiplied by circulating supply, so both halves of the fraction move when any price moves.
The denominator is the part worth thinking about. "Every crypto asset" means whatever the data provider has listed, which includes tens of thousands of tokens with almost no value and changes as tokens are added and delisted. Two providers quoting dominance to two decimal places will disagree, and neither is wrong.
The bands, and what each one actually means
| Reading | What it indicates |
|---|---|
| Above 60 percent | Money is concentrated in Bitcoin. Historically this has been either early in a cycle, before attention spreads, or late in a downturn, after it has left everything else. |
| 45 to 60 percent | The ordinary range for most of the last several years. On its own it says very little. |
| Below 45 percent | Capital is spread widely across other assets. This has historically coincided with the loudest, most speculative parts of a cycle. |
The part that gets left out
- A rising dominance does not mean Bitcoin is going up. If Bitcoin falls ten percent and everything else falls thirty, dominance rises. In a hard sell-off, rising dominance is a description of alts falling faster, not of Bitcoin strength.
- A falling dominance does not mean alt season. New tokens launching adds to the denominator without anybody buying anything. So does a large token unlocking supply.
- It says nothing about safety. Dominance is a size measurement. It has no view on whether any particular token is a good idea.