How to interpret the Bitcoin dominance chart
The Bitcoin dominance chart (BTC.D) is one I love to use when it comes to trading and investing in altcoins. Most novice traders don't actually know how to interpret its data. Here are some usable facts about this chart:
- Read BTC.D on a daily or weekly chart.
- Be aware of the fact that the value on the Y-axis equals the dominance of Bitcoin in the total cryptocurrency market. (If this value equals 45, it means that 45% of the cryptocurrency market capitalization is allocated in Bitcoin , and the other 55% is allocated in all the other coins in this market)
- Coins with a relatively high market cap have a more significant impact on BTC.D
- Supply & demand zones (support and resistance) are respected almost fluently, just like any other chart.
- If BTC.D approaches resistance, it might be a good time to let some money flow from Bitcoin to altcoins.
- On the other hand, if BTC.D approaches support, it might be a good time to reallocate your money in Bitcoin instead of altcoins.
- The major resistance zone around 71% equals the start of an altcoin rally in 2017 and 2021.
- Summarized, if BTC.D is in an uptrend, Bitcoin is outperforming the altcoins. If BTC .D is in a downtrend, altcoins are outperforming Bitcoin .
NFI & DYOR,