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Author: Admin | 2025-04-27
To a certain extent by the Real Bitcoin Dominance Indicator. This indicator works similarly but compares the BTC market cap against the PoW cryptocurrencies only. According to this indicator, comparing BTC with every other altcoin around is like comparing apples with oranges.This indicator is useful for the PoW purists, who aren’t particularly long on ICO-based offerings.Real Bitcoin Dominance Index: Buy Bitcoin WorldwideHow to trade crypto using BTC dominanceBitcoin dominance chart can work as an effective indicator. Here is how it works:BTC dominance to analyze market trendsMuch like any other chart, even the BTC dominance chart moves in cycles. Hence, the concept of identifying a series of lower highs to determine downtrends can be useful in understanding the market breadth.A downtrending dominance chart shows dilution. In a bull market, this might hint at a boom in the popularity of altcoins. In a bear market, this might hint at a trend reversal as it shows that people are getting confident enough to invest in other altcoins. Using BTC dominance in relation to BTC priceTraders often analyze bitcoin prices and its dominance concurrently to reach trading outcomes. When both dominance and prices go up, a bull market might be in the offing. Dropping prices and rising dominance might be bear market signals. Finally, if both indicators drop, a larger bearish trend followed by sideways movements can be around the corner. The first chart shows the peak BTC price action between January 2021 and May 2021. In response, the BTC dominance chart traded flat and even dropped at the end of the mentioned period. If you look closely, you will see that after the highlighted region, both the dominance and price started dropping, resulting in new BTC price lows. A larger bear trend engulfed the market until July 2021.Lastly, rising prices and dropping dominance works as other indicators. It shows that BTC prices are increasing despite the index dropping, meaning that the move at the altcoin counters is more aggressive. Here is what happened post-July 2021:BTC prices started surging between July 2021 and November 2021BTC dominance didn’t drop and even rose a bit during that timeEnough use cases? Here are a few tables with some combinations to help you make the right choices:Case 1: BTC dominance is growingBTC PriceTrading action (possible)UpFavor BTCDownHold on to Fiat (Bearish waves)SidewaysHold on to Fiat/BTC (Choppy markets) Case 2: BTC dominance is decliningBTC PriceTrading action (possible)UpFavor AltcoinsDownHold on to Fiat (Massive bearish waves)SidewaysFavor Altcoins (altcoin season building)Case 3: BTC dominance is sidewaysBTC PriceTrading action (possible)UpFavor BTC (outside money coming to BTC)DownHold on to Fiat (Bearish waves)SidewaysHold on to Fiat/AltcoinsIs the bitcoin dominance chart a reliable indicator?The BTC dominance chart is reliable if you have the bigger picture in mind.
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