Dominance by market cap

The dominance ratio is calculated by dividing a specific coin’s market cap by the total market cap of the top 125 coins and multiplying the result by 100. It shows how much of the entire cryptocurrency market a specific coin represents.

Dominance charts serve as a dynamic indicator of market sentiment, providing traders with insights into shifting trends, risk appetite, and the relative performance of different cryptocurrency segments. Traders leverage this information to make informed decisions, optimize portfolio allocation, and align their strategies with prevailing market dynamics.

For instance, if Bitcoin dominance is declining, it suggests a potential trend where alternative cryptocurrencies (altcoins) are gaining traction relative to Bitcoin. Traders often interpret this as a shift in investor preferences and may adjust their portfolios accordingly to capitalize on potential opportunities in the altcoin market.

Conversely, a rising Bitcoin dominance might signal a more risk-averse market, with investors flocking to the more established and perceived safer asset, Bitcoin. This scenario could influence trading strategies, prompting traders to reconsider risk exposure and potentially reallocate assets.