Bitcoin dominance is a crucial indicator for comparing Bitcoin's market capitalization against the combined value of all altcoins. This metric not only reflects Bitcoin's financial health but also indicates the level of risk investors are taking with altcoins.
During what many in the crypto community refer to as "altcoin seasons," the market sees a surge in investments in altcoins. These periods often occur when investors feel bullish about the market’s future and look for higher returns outside the more stable Bitcoin. Altcoin seasons can lead to significant decreases in Bitcoin dominance, as was evident during:
Altcoin markets are generally more volatile than Bitcoin. This volatility is influenced by factors such as technological advancements, regulatory news, and market sentiment. Investors need to be cautious, as the high potential for returns comes with increased risks. Understanding Bitcoin dominance can help manage these risks, as shifts in dominance can indicate changing market conditions.