We often wonder when Bitcoin's price is dropping, altcoin's price drop too. Usually, altcoins (other coin than Bitcoin), follow the price movement of Bitcoin in the market even though every coins have different developers, communities and use cases.
But Why?
When Bitcoin is dumping, it's pulling along altcoins, and the worst part is altcoins tend to lose more value than with Bitcoin. And there lots reasons why this is happening. And in this article, I'm going to share some of this reasons.
Trading Pairs.
Bitcoin is the very first cryptocurrency and all exchanges, centralized or not, Bitcoin exist there at the top unlike most altcoins that can only be found in some exchanges.
When a certain coin is listed on an exchange, like Kucoin and Binance, it will be paired to BTC, ETH and USDT, to name a few. But most altcoins were paired to Bitcoin.
Let's have an example;
When someone buy a Bitcoin Cash BCH, it will be paired to Bitcoin. So with a pairing of BCH/BTC, the price of BCH somehow rely on BTC.
When the price of BTC is going up, you can buy more with it or should we say more demands that's why the price of BCH is also increasing.
But when BTC is going down, you can only buy lesser with it or it will have a less demand, meaning it will be in a low price.
That's how the correlation work between BTC and altcoins.
But it doesn't always works like that.
Because there are still other things that can affect it like....
Traders And Investors Of The Crypto Market.
It mean us, yes. If we have a coin in our wallet, we are the traders and investors.
And most of us doesn't only trade in one coin. We trade in different kinds of coins in the market.
When the price of BTC is going up, the price of altcoins are going down because the Liquidity of altcoins are transferred to BTC when they saw that the price of Bitcoin is going up and no one wants to miss it. That's why when a trader saw the positive price action of BTC, they are selling their altcoins just to buy more Bitcoins.
The same goes when Bitcoin is dumping. They know that when Bitcoin is going down, the chance of altcoin's price to drop is relatively high and that's when they sell it to a stablecoins like USDT, USDC and BUSD.
Why Does Altcoins Dumped and Pumped More Than Bitcoin?
The main reason of this is the Market Cap of altcoins.
The altcoin Market Cap is very little compared to Bitcoin.
The Use Of Fundamentals.
We know that most coins rely on how the price of BTC moves but we can notice that there are also coins that can pump hard when BTC is stable - and that's because of the use cases or fundamentals.
Each coins have different developers, projects and use cases. And when a developers of that coin announces a good fundamentals like being listed in a big exchange, adoptions or a huge events, the price of that coin can pump very hard even if BTC is just moving sideways.
The BTC.D or Bitcoin Dominance.
The BTC.D means how much percentage of the total cryptocurrency market cap Bitcoin have.
When the Bitcoin Dominance is huge or rising, it means that the buying power is on the side of Bitcoin compared to altcoins. This also one reason why the price of altcoins are losing its value.
But, if the BTC.D is going down, it means that the buying power is on the side of altcoins making their prices to pump. Usually, when BTC.D is down, altcoins are rallying making them grown to more than +100% of their current prices.
The Fear and Greed Index.
Of course, everything I mentioned above will be nothing if the market sentiments are experiencing Fear Index.
Just like what we have experienced in the last couple of weeks, the Fear sentiments was experienced by the crypto market making almost all the coins losing there value to more than -60%.
END.
Ayown nagets ko din. Salamat papi