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Bitcoin dominance declines: why is this indicator important?

Published:

6 abr 2021 14:19 GMT

The share of ‘digital gold’ in the cryptocurrency market has hit its two-year low.

Cryptocurrency market capitalization surpassed the $ 2 trillion threshold on Monday for the first time in history, growing 4% in 24 hours.

According to the CoinGecko portal, the capitalization of the world’s main cryptocurrency, bitcoin, has reached $ 1.09 trillion, occupying the 54% of the market total of cryptocurrencies.

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Its current share in the market is the lowest in the last two years.

Until recently, ‘digital gold’ and several other digital currencies enjoyed enormous influence in the market, but with the development of this sector, the dominance of bitcoin continues. decreasing. Sergey Troshin, director of the Six Nines data center, told RBC that this trend is an indication of healthy changes, since investors have become interested in a larger number of assets.

Shows?

According to the expert, the dominance index of bitcoin is important to understand the vector general of the market at the present time. The decrease in this indicator means that investors are more focused on the ‘altcoines‘—Cryptocurrencies other than bitcoin—, showing its inclination towards greater risks through the search for new forms of investment. This normally takes place for a bull market.

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Active sales of altcoins and investments in bitcoin reflect investors’ desire to abandon risks and reorient towards a cryptocurrency “more solid”, explica Troshin.

“Bitcoin is considered a gold digital analog and it is increasingly associated with this precious metal and with market patterns linked to gold at one stage or another, “he said.

The fall in the dominance of bitcoin by 1% means a growth of altcoins by approximately 10%, says the CEO of Cryptorg Exchange, Andréi Podolián.

Profit for investors

The bitcoin dominance index is used by investors to analyze the market situation before buying or selling one or the other asset, explains Gleb Kostariov, director for Russia and other former Soviet countries of the Binance cryptocurrency exchange.

Based on this indicator, investors determine their strategy: occupy positions in the bitcoin sector, redirect capital towards altcoines or seek refuge in dollars or stablecoins (‘stablecoins’), which are cryptocurrencies with minimized volatility because they are linked to ‘fiat money’ or commodities.

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