Among the important questions that are frequently asked every time Bitcoin rises, leaving alternative digital currencies behind in a red sea.
The digital currency trading platform Binance recently shared a post on its official blog, looking for an answer to this question and also touching on how there is a sharp distinction between the Bitcoin and alternative digital currencies markets.
The total market capitalization of the cryptocurrency market has reached the level of $ 400 billion, most of which comes from the value of Bitcoin (BTC).
Bitcoin rose in price ahead of the US presidential elections, reaching the $ 13,500 level at the time of writing this article.
While bitcoin investors were watching this rally with interest, investors in alternative digital currencies could not enjoy this rally.
As Bitcoin rose alone, and its dominance, which was at 55%, rose to 63.5%.
Bitcoin has virtually suppressed the alternative digital currency market.
Comparing what is happening with Bitcoin and altcoins to traditional markets:
Although Binance did not go into depth and explain the reason behind the difference between Bitcoin and alternative digital currencies, it did examine why the gap between the two is widening.
Binance indicated that with the rise in the price of bitcoin, more and more investors are willing to buy bitcoin and make money from its rise, which means increased pressure on alternative digital currencies.
Binance gave an example from the traditional markets and pointed to the relationship between the US dollar and other currencies, and gave the following example to illustrate:
Suppose the US dollar is appreciating strongly.
If you want to make money on the rising dollar, you will need to sell your local currency and buy the dollar.
But let's imagine everyone wants to earn a dollar and everyone else is doing the same.
This will affect both the local currency and the dollar.
As the strengthening or weakening of the dollar in the traditional markets causes currencies such as the euro, the Australian dollar and the Canadian dollar to move in the opposite direction.
The same applies to the cryptocurrency market.
The increase in demand for bitcoin also affects the altcoin market.
Increased FOMO feelings:
According to the research conducted by Binance, investors do not want to be left behind by Bitcoin's continuing rally, they want a share of the returns that Bitcoin provides.
This was seen as a reflection of the greed in the market as well as creating a certain effect of the fear of losing opportunity (FOMO) and the rise of Bitcoin.
The impact of FOMO sentiment on the market is getting more intense, the Binance team stated that alternative digital currency investors are beginning to switch to Bitcoin and this is the reason for the opening and widening of the gap between these two markets.