Bitcoin dominance
What does it mean when Bitcoin's share of the whole crypto market grows, and what can the ETH/BTC ratio only partly tell you?
In plain words
Bitcoin dominance is Bitcoin's market value as a share of the total value of all cryptocurrencies. The ETH/BTC ratio compares the second-largest asset to Bitcoin; when it falls, Bitcoin is gaining ground against that one asset, which is a partial view of dominance because it ignores everything else in the market.
Why it matters
Dominance shifts show where risk is being concentrated. Rising dominance can mean money is moving out of smaller, more volatile assets towards the largest one, or simply that all assets are falling and Bitcoin is falling less. The ratio alone cannot separate these two cases.
In a real week: BTC, week of 12 September 2022
In the week of 12 September 2022, BTC fell 11.04% to 19416.18, while the ETH/BTC ratio dropped 15.06% and ETH lagged BTC by 13.4 percentage points, meaning ETH fell roughly a quarter. Both moved in the same direction with a close hourly correlation of 0.83. BTC's share against ETH rose even though BTC itself lost more than a tenth of its value.
A common mistake
Reading a falling ETH/BTC ratio as rising Bitcoin dominance across the whole market. It measures only Bitcoin against one rival; smaller assets may be gaining or losing share at the same time.