Key crypto indicators: how to read the market

Bitcoin Dominance

The Bitcoin Dominance level reflects the ratio of Bitcoin's market capitalization to that of all other digital assets. Investors typically use this metric to decide when it's better to buy or sell Bitcoin versus altcoins.

An increase in Bitcoin dominance generally indicates that investors are accumulating the leading cryptocurrency and reallocating capital from altcoins to mitigate risk.

This typically occurs during market corrections or periods of uncertainty. It means investors prefer to hold Bitcoin, as it is considered more stable than other cryptocurrencies. For instance, since the beginning of 2025, the BTC dominance has increased by 15%, rising from 55.7% to 64.1%.

A decline in Bitcoin dominance, on the other hand, may signal increased investor confidence in a positive market trend and greater willingness to take risks by investing in altcoins. This often precedes an "altseason", when altcoins outperform Bitcoin in terms of growth.

The last time this happened was in early 2021, when Bitcoin's dominance dropped by more than 1.5 times in six months, from 69.7% to 40%. During this period, Bitcoin's price roughly doubled (from $28,900 to $58,200), while Ethereum's price surged more than 5.5x (from $730 to $4,075).

Fear & Greed Index

Another popular indicator among crypto investors is the Fear & Greed Index, which reflects investor sentiment. It's often referred to as the "emotional state index of the crypto market."

Initially developed for traditional markets, the Fear & Greed Index was later adapted for the cryptocurrency market. It takes into account the following metrics:

Crypto asset volatility
Trading volumes
Social media and news mentions
Bitcoin dominance
Google Trends data related to digital assets

The index ranges from 0 to 100. The higher the value, the higher the risk of profit-taking and subsequent market correction. A range from 75 to 100 indicates "extreme greed," suggesting a strong chance of a price drop.

Conversely, lower values suggest high buying interest and a potential price rebound. A reading between 0 and 24 indicates a strong buying opportunity, while readings of 25 to 49 reflect cautious investor sentiment.

This index mirrors Warren Buffett's well-known principle: "Be fearful when others are greedy, and greedy when others are fearful."

HODL Waves chart

A relatively new indicator exclusive to the crypto market, the HODL Waves Chart shows how long Bitcoin has remained inactive in investor wallets.

This indicator helps assess the behavior of Bitcoin holders and can signal shifts in market sentiment.

Analysts believe the more coins are "asleep," the stronger the growth driver for Bitcoin becomes. For example, in 2025, Bitcoin reached a new all-time high (ATH), surpassing $100,000.

At that time, about 40% of BTC coins hadn't moved for more than three years — a record high. Meanwhile, the percentage of Bitcoin held on exchanges fell to a five-year low of just 12%.

These metrics may signal future Bitcoin growth, as experts believe BTC still has the potential to reach new ATHs — meaning it's a potentially profitable asset worth holding.

Momentum indicators

Momentum indicators reflect the strength of price movements in either direction, helping investors identify overbought or oversold conditions in digital assets.

The most popular momentum indicator among investors is the Relative Strength Index (RSI). It ranges from 0 to 100. For better accuracy, investors typically watch for values of 30 and 70.

RSI above 70: overbought — potential correction ahead
RSI below 30: oversold — possible rebound

Before the Bitcoin correction in early 2025, the RSI reached 80. At the end of 2021, before BTC fell from its ATH of $69,000, the RSI almost hit 90.

Most exchanges offer RSI and similar indicators, sometimes by default, but they can also be accessed via third-party services.

However, the main challenge for beginners is that these indicators need proper configuration. If set incorrectly, they may misrepresent the market situation.

On-Chain data

Network metrics, such as address activity and transaction volume, also play a key role in analyzing the cryptocurrency market. For example, rising transaction activity suggests ecosystem growth.

In addition, investors often assess:

Inflow/outflow of funds to/from exchanges, which can hint at upcoming buy/sell activity
Significant wallet activity, which can impact market dynamics
Spent Output Profit Ratio (SOPR) — shows profit/loss from sold coins

For example, large inflows of stablecoins and outflows of BTC or ETH from exchanges may indicate accumulation by major players.

SOPR is another crucial metric. The more it deviates from 1, the higher the chance of a correction or bounce:

In February 2024, Bitcoin experienced steady growth, with SOPR values ranging from 1.1 to 1.3.
When the SOPR exceeds 1.5, many investors lock in profits, thereby increasing the risk of a correction.
If SOPR drops below 0.9, it indicates that investors are selling at a loss, a potential signal of a bottom formation and an upcoming recovery.