After the discovery of cryptocurrency as an excellent tool for earning and investing, hundreds of people rushed to buy it. However, investing in Bitcoin or altcoin alone isn’t enough to increase earnings. It is very important to be able to analyze the market and the news of the crypto world to save capital. In this article, we will analyze the basic tools that beginners need to know about for successful work with cryptocurrency. To be more precise, you will learn about the dominance of Bitcoin, market capitalization and trading volumes of cryptocurrencies.

When investors buy this or that coin, they look at a number of characteristics, in particular, the "Market Cap". Capitalization can relate both to an individual token or coin, and to the cryptocurrency emporium as a whole.

To date, Bitcoin (BTC) is called the first cryptocurrency not only because it appeared first on the market, but also because its capitalization is 40.6% of the entire crypto currency market (data as of 01.11.2022). The second place is taken by Ethereum (ETH) 19%, the third by BNB 3.8%.

Market capitalization

The total market capitalization is an indicator that reflects the current total value of all coins of the crypto market and the size of the industry as a whole. This value is calculated by multiplying the number of coins in circulation by the value of the asset itself.

To date, the total market capitalization is almost $ 1.95 trillion. However, in the fall of 2021, this figure exceeded $3 trillion for the first time, $1.8 trillion of which accounted for BTC and ETH (according to https://www.coingecko.com/).

Data on the total market capitalization is mainly used to compare this industry with other economic spheres. The total capitalization of cryptocurrencies is compared with the capitalization of securities, precious metals, etc. Due to such forecasts, it’s possible to approximately calculate the growth or fall of cryptocurrencies in the near or long term. However, these forecasts cannot be fully trusted, because different sectors of the economy attract different investors. Altcoin doesn’t necessarily have to attract traders, dealers and speculators. It is impossible to predict the growth or fall in the value of cryptocurrencies based only on market capitalization, because:

1. A lot of calculations

Experts need to perform several calculations for a reliable assessment of the crypto asset. An error in one action will lead to an incorrect result in conclusion.

2. Data on the market capitalization of assets can be fabricated

Scammers do not disdain this method in order to attract capital to their fake crypto projects. If a thorough analysis is not carried out, the impression of reliability and security may be created, which may lead to the loss of assets.

3. Total market capitalization is the data at a given time

Today the number can include 12 zeros, and in 3 months it will lose two.

The dominance of Bitcoin in the market

As mentioned above, Bitcoin (BTC) is rightfully considered the main cryptocurrency. To date (as of 01.11.2022), its capitalization is almost $790 million (40.6% of the total market according to https://coinmarketcap.com).

Since for the entire existence of the cryptocurrency, Bitcoin holds a leading position, the share of its market capitalization is given great attention and even given a name: The Bitcoin Dominance Index. In recent years, Bitcoin and a couple of top cryptocurrencies have had an impressive capitalization weight in the market. However, over time, this indicator decreases, which is considered the norm: there are more types of coins and investors are becoming increasingly interested in them.

The ability to analyze the behavior of bitcoin is very important when you work with cryptocurrency. If the dominance of bitcoin is declining, it means that traders and investors are currently betting on altcoins, they aren’t afraid to take risks and invest in new coins on the market. If the capitalization index of bitcoin goes up, it means that investors choose a stable "digital gold" and aren’t ready to expose their assets to risks yet.

Fact: if the dominance of Bitcoin (BTC) decreases by 1%, then, as a rule, the growth of altcoins will be up to 10%.

As a result, the Bitcoin dominance indicator is used for a clearer understanding of the distribution of assets in the market. Focusing on the behavior of the data, the raiders understand that it is better for them to invest in bitcoin, or take a risk and make money on altcoins, or even withdraw money to a stablecoin.

Trading volumes in 24 hours

Cryptocurrency is very volatile. Therefore, to make money on it, you need to monitor not only its value, but also pay attention to the daily trading volume (24h Vol). Traders earn money by selling /buying currency, so it’s important for them to monitor the activity of the emporium. With low trading volumes, liquidity will be low too, which means that price fluctuations will be insignificant. Conversely, high trading volumes lead to an imbalance of supply and demand, which will cause the price to go up or down.

Beginners are usually advised to trade with inactive trading volumes in order to avoid losing assets. As a rule, the minimum activity of traders occurs at the end of trading sessions, or between them.

Experienced traders, on the contrary, prefer to work during high trading volumes (earnings are much higher). A good moment falls on the opening of trading sessions.

Trading session schedule (GMT +0):

  • Asian session: 0:00-8:00 (Tokyo) 1:00-9:00 (Hong Kong, Singapore)
  • European Session: 6:00-14:00 (Frankfurt, Zurich, Paris) 7:00-15:00 (London)
  • American session: 13:00-21:00 (New York) 14:00-22:00 (Chicago)
  • Pacific session: 0:00-8:00 (Sydney) 1:00-9:00 (Wellington)

Conclusion

To achieve success in the crypto world, it isn’t enough to have the means to buy a digital currency. You can't just purchase some altcoin and just wait for its value to skyrocket. To multiply your assets, you also need to be able to analyze market behavior, anticipate demand for cryptocurrencies and constantly learn.