When Bitcoin's dominance increases, it means that Bitcoin's share of the market capitalization is growing while the shares of other altcoins (such as Ethereum, Ripple, etc.) are decreasing. This occurs when investors consider Bitcoin to be safer and invest more heavily in it.
Bitcoin is often considered a "safe haven asset" within the crypto market, similar to how gold is viewed in traditional markets. When there is uncertainty or instability in the market, investors tend to move their money into Bitcoin because they perceive it to be more established and reliable. This increases Bitcoin's price and its market cap, as well as its dominance index.
On the other hand, if Bitcoin's dominance rises suddenly, it may also mean that people are pulling their money out of altcoins and into Bitcoin. This causes altcoin prices to drop because money is being withdrawn from them.
This situation often arises when there is major news or an event affecting investor sentiment, such as regulatory changes or a major institution adopting Bitcoin.
Therefore, when Bitcoin's dominance increases and the altcoin market falls, it can be an indicator of investor preferences and market sentiment, where investors opt for more stability and lower risk by favoring Bitcoin.
