A new product by crypto exchange Binance will soon allow traders to bet on Bitcoin’s increasing or decreasing share of the crypto market, it said in a release today.
#Binance Futures Will Launch USDⓈ-M BTCDOM Perpetual Contracts with Up to 25X Leverage
— Binance (@binance) June 17, 2021
Offered under the ‘BTCDOM’ ticker, the product is a cryptocurrency price index that reflects the market dominance performance of Bitcoin by comparing the asset to the top 20 cryptocurrencies on Binance by market capitalization (excluding stablecoins).
“The BTCDOM Index is a metric that traders can use to quickly get a sense of Bitcoin’s value relative to that of the broader cryptocurrency market,” said Binance in the post.
Bitcoin’s dominance is a measure of the asset’s market share relative to other cryptocurrencies.
It, as the image below shows, accounted for as high as 93% of the entire crypto market in 2013, fell to its lowest 33% in January 2018, recovered to over 69% in 2020, and has since fallen to 43% as of today. (Note: This chart compares Bitcoin to all other cryptocurrencies while BTCDOM is relative to just 20. Figures may hence vary.)
Bitcoin dominance and uses
BTCDOM will be a ‘perpetual’ contract, a term for a futures product with no expiry date. It will be Tether margin (use USDT as collateral) and traders will have access to 25x leverage.
As per Binance, the BTCDOM Index provides insights into the market and can be used as a tool to speculate on Bitcoin’s relative strength against other cryptocurrencies.
For traders, this would allow them to make a macro bet on the crypto market if altcoins gain market share relative to Bitcoin (the index will lose value). Vice versa, if altcoins lose market share relative to Bitcoin, the index will gain value and traders will be able to squeeze out a profit (or hedge their bets).
However, the index is unlikely to alternate between gaining value and losing value. “In certain conditions, if Bitcoin falls in price, but the rest of the cryptocurrency market falls at a similar rate, then Bitcoin dominance is likely to remain the same,” Binance explained.
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