Binance just announced to launch USDⓈ-M BTCDOM perpetual contracts with up to 25x leverage. Allowing users to go long or short on the Bitcoin dominance.
What is BTC Dominance?
When trading and investing in cryptocurrencies, there’s always one major metric that anyone should keep an eye on: Bitcoin Dominance. And it’s as straight forward as the term seems to be, it displays the dominance Bitcoin has across the entire cryptocurrency industry.
Currently, the global crypto market cap is $1.69 Trillion. Bitcoin has a total market cap of $740M and has therefore 43.8% dominance across the entire industry.
How do traders use Bitcoin Dominance to trade?
Bitcoin Dominance is often used at higher time frames by traders to speculate on the overall crypto markets. It provides an indication in whether Bitcoin or altcoins are a better ‘investment’ across the next couple of days, weeks, or even months.
For example, I (Marco) published a BTC.D chart at April 5, in which I looked at the support and resistance levels of BTC.D. Here, I saw and predicted that the dominance level was likely going to retest the lowest levels it’s ever seen back in 2018.
The move went much faster than anticipated, and altcoins provided significant returns within weeks, until this 2018 low was hit. As expected, this is where BTC.D bounced off of the support level, during which altcoins went down significantly versus Bitcoin and have been mainly trading downwards and sideways for the past couple of days.
What does it mean to trade BTCDOM perpetual contracts?
Binance states: ‘’Binance BTCDOM Index is a cryptocurrency price index reflecting the market dominance performance of Bitcoin.’’ The full index calculations and rebalances can be read about on their announcement page. It compares BTC to the top 20 cryptocurrencies on Binance by market capitalization, excluding stablecoins.
BTC Dominance didn’t previously exist as an actual trading pair, let along with leverage. Users can use 1-25x leverage on the index.
Typically, leverage enables cryptocurrency to trade in more unnatural ways with higher and lower spikes. And, trading with leverage brings significant risks unless it’s done with proper risk management. It’s going to be interesting to learn whether these contracts can influence the overall BTC Dominance rates or not.
Interested in learning more about Binance? Check out our exchange overview!