How do bitcoin prices affect Altcoins?
Since bitcoin is in arguably the most significant and dominating cryptocurrency today, it comes as no surprise that bitcoin holds power over other cryptocurrencies. Currently, Bitcoin has the largest share in the market.
The connection between Bitcoin and Altcoins:
Many of the trades that happen in the cryptocurrency market are between altcoin and bitcoin trading pairs.
The main reason for this is that most altcoins do not make trading pairs with other fiat currencies. Therefore, bitcoin is the only other cryptocurrency that altcoins can pair with.
As a result, the correlation between bitcoin and altcoins is significantly harmful.
To explain it further, when bitcoin is stable in the market, it becomes ideal for users to buy altcoins since bitcoin’s stability perfectly forms the base currency.
On the other hand, when bitcoins are unstable, or when the market for bitcoin declines, altcoins see a significant fall in the market.
The rise and fall ofAltcoins:
In the crypto market, there are more than 5000 altcoins. Most of these altcoins are bitcoin and have all their functionalities.
Among all altcoins, Litecoin is considered the closest resemblance to bitcoin because it shares the same codebase.
So, when the price of bitcoins rises, Litecoins also enjoy the hike in the market. The dependency on altcoins on bitcoins seems ideal when the bitcoin market is considered good.
However, the downfall to this relationship is that if bitcoins decline, Litecoins also suffer a fall in their process.
Additionally, because bitcoin and litecoin share the same codebase, it can imitate bitcoin’s movement in the market.
This means that a problem in the Bitcoin network can affect Litecoin’s or any other altcoins, for that matter, value.
As of September 2021, some noteworthy altcoins such as Avalanche (AVAX), Polygon, and Luna have declined up to 21.95% in the market.
The rise and fall of Bitcoin:
Bitcoin used to hold over 85% of the total cryptocurrency market. It has also experienced a drop as low as 45%.
This decline in the market has paved the way for altcoins to make their way to the top, with Ethereum as the “gatekeeper” for the rise among altcoins.
Bitcoin broke its record of $20,000 to over $40,000 as of September 2021. With this surge, bitcoin now enjoys dominance over the market at 69% share.
However, after analyzing the crypto market, we can see that even though bitcoins rose, most of the altcoins did not rise, except Litecoin, Ethereum, and other primary altcoins that also experienced high profits against the U.S. Dollar.
How does the rise of Bitcoin affect Altcoins?
Bitcoin is like the anchor when we look at the cryptocurrency world. Therefore, when the process for bitcoins starts to decline, traders often begin trading or selling off their other coins, i.e., the altcoins, and pick up other cryptocurrencies such as fiat currency.
Investors worldwide are now interested in buying more cryptocurrencies and investing more significant sums in the crypto market.
One of the primary reasons for this is the superiority of bitcoins in bringing forth a financial revolution.
Although most investors opt for altcoins to trade in, everyone is aware of the dependency on bitcoins in the crypto market.
Can Altcoin prices affect Bitcoin?
The short answer is no. More often than not, altcoins rarely boost bitcoin prices. When Facebook announced the Libra (now Diem) project in 2019, Bitcoin was considered the largest beneficiary of the project.
Libra (now Diem) successfully threw light into the crypto market, an excellent promotion for bitcoin.
However, many altcoins suffered losses due to Libra’s group of blue-chip partners who were disturbing altcoin values.
At Solutiontales we make it easy to understand the throes of cryptocurrencies. Remember, a wise investor can make money in a bull or bear market when given the right data.