How Does the Inclusion of Stablecoins in the Total Market Cap Calculation Affect the Utility of the Bitcoin Dominance Ratio?

Including stablecoins in the total market cap calculation significantly skews the utility of the Bitcoin Dominance ratio as a risk indicator. Stablecoins have a large and growing market cap but are not speculative, risk-on assets.

Their inclusion artificially suppresses Bitcoin's dominance figure, as their market cap is not part of the capital that rotates between Bitcoin and altcoins. When investors flee to stablecoins during a downturn, Bitcoin Dominance falls, incorrectly signaling a potential "altcoin season" when in fact it's a risk-off move.

Many analysts now prefer to use a "Free-Float Dominance" that excludes stablecoins for a clearer picture of speculative capital flows.