Thread by @DaanCrypto

The Use of $BTC.D When Trading $ALTS 📚

🔹What is Bitcoin Dominance ($BTC.D)?
🔹How does Bitcoin Dominance move?
🔹How can we use it in our analysis?

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🔹What is Bitcoin Dominance ($BTC.D)?

Bitcoin Dominance shows the percentage Bitcoin's market cap is compared to the total crypto market cap.

For example: The BTC Dominance is 50% and the total cryptocurrency market cap is $1T. That means $BTC has a market cap of $500B.

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🔹How Does Bitcoin Dominance Move?

If $alts were to gain more value than $BTC (ALT/BTC pairs going up), that would make the Bitcoin Dominance go down.

This is because alts would become worth more compared to Bitcoin within the entire crypto market.

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It's important to understand that bigger coins like $ETH, have a lot more impact on the $BTC.D chart. This is because they are worth more relative to the entire cryptocurrency market.

This is often why you see big moves in Bitcoin Dominance paired by big moves on Ethereum.

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🔹How can we use it in our analysis?

It may sound crazy at first, but the Bitcoin Dominance chart actually reacts quite well to big resistance and support area's. Even though it's just a tracker of a big collective.

Check my fractal from last year:

https://twitter.com/DaanCrypto/status/1344229801821937665

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We can see this especially on the weekly timeframe chart where certain horizontal levels have acted as support and resistance very clearly.

Just like any other chart basically.

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The chart shows whether $alts are in an up trend or down trend.

This is then used by a lot of people to map out where they start accumulating longer term alt coin positions and where they will sell these positions.

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For example: We can see the 71% level acting as a strong resistance.

This level kicked off both the 2017 alt season and the alt run we've seen in 2021.

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While the 39.8% level has proven as a strong support in May of 2018 and just recently, in May of 2021.

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Generally, you don't want to enter long term alt coin positions when the Bitcoin Dominance is trending up on high timeframe.

This usually happens when Bitcoin is seeing extreme volatility or when the market has a very bearish long term outlook.

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Recently, we've seen a 4-5 month $BTC.D down trend go into consolidation. During this time we saw ALT/BTC pairs go down a lot.

This could be the start of a higher timeframe reversal but zooming out, BTC.D is still trending downwards.

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Currently, price is consolidating in this ascending triangle formation. A break down here would likely result in another test of the 39.8% level and maybe even 35.35% which would be the all time low.

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A breakout would likely result in a move to the 48-52% area which is an important level to watch. Going there would still be fine for $ALTS long term but will definitely hurt the ALT/BTC pairs in the short/mid term.

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Note that if ALT/BTC pairs go down (BTC.D Up), that doesn't mean $ALTS HAVE to go down in USD value.

We've seen several periods where $BTC went on a tear and pumped quickly while ALT/BTC pairs bled. The pump on BTC usually did mean $ALTS also gained value in USD.

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So far, every $BTC cycle, $BTC.D has made new lows.

Whether this is due to the increased amount of $alts in the market, the increase in retail investors or the development and new use cases from these $alts.

Up to you to decide and if this trend will continue.

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Generally, you want to:

1. Accumulate long term $ALT positions when $BTC.D is at high timeframe resistance
2. Start scaling back into $BTC when $BTC.D is reaching long term supports.

I hope this has been helpful. Have a great day! 😄🔥

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