Relationship between bitcoin and altcoins

[Joe200]

Recently, someone on here explained very well the relationship between the prices of bitcoin and altcoins. I think there were 3 scenarios: if bitcoins are in a bubble, crashing, or just going up. Or something like that.

Could someone link to that post? I thought it was an especially good explanation.

[wobber]

It should be interesting to discuss also those second-generation cryptocoins that the whole world speaks of.

Would they dethrone Bitcoin?

[Joe200]

Yes, they look interesting, though I don't completely understand them. I like that they do it without PoW. Now that you know that a crypto can work without PoW, all those miners / ASICs seem like an even bigger waste of money.

Back to my original question...

[shmadz]

This post you mention does seem interesting and I hope someone finds it. In the meantime, regarding the relationship between bitcoin and alt-coins...

I've been slowly developing the opinion that the alt-coins are simply going to provide extra liquidity. As bitcoin transactions become more expensive because of the bloating of the blockchain and the demands on the network to process an increasing number of transactions per second, alt-coins will fill the gap for smaller, cheaper, transactions.

I can envision a world where a bitcoin transaction might carry a mandatory fee of, say, .001 BTC (keep in mind, cavirtex already charges this amount for withdrawls) If bitcoin someday is worth $100,000 this would amount to a minimum fee of 100 dollars per transaction, meaning buying a coffee with bitcoin would be a very expensive proposition. I foresee the alt-coins as filling the gap and providing layers to facilitate all nature of transactions, but bitcoin will remain the gold standard.

 Please note: My "slowly developing opinion" is not fully formed and I would welcome any debate on this subject.

-Thank you.


(disclosure: As a miner, I would stand to benefit from high transaction costs, so I cannot be considered impartial.)

[Joe200]

IIRC, the logic went something like this:
* When BTC is crashing, alts crash too because people sell alts for bitcoins and then bitcoins for fiat.
* When BTC is rising rapidly / is in a bubble, alts go down, because everyone wants to put every penny into bitcoin.
* When BTC is trending or rising at a normal rate, alts go up, because people want to "diversify" / get bored with btc.

Does that sound right? What do you guys think?

[TERA]

https://bitcointalk.org/index.php?topic=380690.msg4086673#msg4086673

It's all based on psychology.

During a btc bubble, alt/btc tends to move against btc. This is because
1) Traders all want to hold btc to be part of the btc rally, and are willing to sell the alt at any price, to oversold levels, to do so. This drives alt/btc down.
2. Traders have the attitude that alt/usd is a constant and then when btc/usd rises, mathematically, alt/btc must fall, and vice versa.
3) They use the alt as a hedge against btc corrections during the rally.
Summary: Traders want to hold BTC.

During a btc crash after a bubble, alt/btc tends to move with btc. This is because
1). Investors are so bearish that they sell the alt to oversold levels because it necessary to sell btc for fiat.
2) A bearish mindset that if btc can crash then alts must be completely worthless.
Summary: Traders want to hold FIAT.

When these conditions are not met, often btc/usd does not affect alt/btc. This is because
1) Investors are not having trading reactions on one pair based on the other pair and there is no psychological reason to do this.
2) Investors realize that the value of alts rise and fall with the value of btc.
Summary: Theres no strong influence over what traders are holding.

[shmadz]

What do you guys think?

I think the operators of these alt-coin exchanges have arb-bots that are keeping the prices in check (and skimming the profits) - not accusing anyone, just saying that's what I think.

[Siegfried]

This post you mention does seem interesting and I hope someone finds it. In the meantime, regarding the relationship between bitcoin and alt-coins...

I've been slowly developing the opinion that the alt-coins are simply going to provide extra liquidity. As bitcoin transactions become more expensive because of the bloating of the blockchain and the demands on the network to process an increasing number of transactions per second, alt-coins will fill the gap for smaller, cheaper, transactions.

I can envision a world where a bitcoin transaction might carry a mandatory fee of, say, .001 BTC (keep in mind, cavirtex already charges this amount for withdrawls) If bitcoin someday is worth $100,000 this would amount to a minimum fee of 100 dollars per transaction, meaning buying a coffee with bitcoin would be a very expensive proposition. I foresee the alt-coins as filling the gap and providing layers to facilitate all nature of transactions, but bitcoin will remain the gold standard.

 Please note: My "slowly developing opinion" is not fully formed and I would welcome any debate on this subject.

-Thank you.


(disclosure: As a miner, I would stand to benefit from high transaction costs, so I cannot be considered impartial.)

I tend to agree.

[nastybit]

https://bitcointalk.org/index.php?topic=380690.msg4086673#msg4086673

It's all based on psychology.

During a btc bubble, alt/btc tends to move against btc. This is because
1) Traders all want to hold btc to be part of the btc rally, and are willing to sell the alt at any price, to oversold levels, to do so. This drives alt/btc down.
2. Traders have the attitude that alt/usd is a constant and then when btc/usd rises, mathematically, alt/btc must fall, and vice versa.
3) They use the alt as a hedge against btc corrections during the rally.
Summary: Traders want to hold BTC.

During a btc crash after a bubble, alt/btc tends to move with btc. This is because
1). Investors are so bearish that they sell the alt to oversold levels because it necessary to sell btc for fiat.
2) A bearish mindset that if btc can crash then alts must be completely worthless.
Summary: Traders want to hold FIAT.

When these conditions are not met, often btc/usd does not affect alt/btc. This is because
1) Investors are not having trading reactions on one pair based on the other pair and there is no psychological reason to do this.
2) Investors realize that the value of alts rise and fall with the value of btc.
Summary: Theres no strong influence over what traders are holding.

I agree with this, more or less this is what happened during the last year during pre-in-post BTC bubbles.
Don't forget that we have many different alts "type" today so it might apply only to clones

[Wilhelm]

Whats the relationship between altcoins and ctrlcoins ? 

[lemfuture]

husband n wife

[Impaler]

The trend I've noticed is that when the Upward movement of BTC stales and people become hesitant to push the price higher they go into Alts and start a bubble their as well, and that Alt bubble tends to pop first and THEN the BTC bubble starts to collapse as well.  Thus a wise trader could use the Alt market as a signal when to reverse their long position on BTC to a short position.

[byronbb]

I have been paying attention to LTC/BTC. I have heard some pro-LTC comments from non-retards on this board so am watching it carefully.

Who lead the little rally yesterday?? Was it LTC? The LTC chart was much more bullish than the BTC chart at the time. 

[traderCJ]

In the past, |dp/dt (alt coin avg price(t))| > |dp/dt (btc price(t))|, where dp/dt = derivative of price w.r.t time.  They essentially acted like an extreme version of bitcoin with volatility added for spice.  After this last correction and mild recovery, I'm not really seeing that same behavior.  They tend to just be tagging along for the ride with the occasional alt coin getting pumped and dumped.  It's an interesting phenomenon .. people have recognized that no matter how lousy a coin is, the first people to the feeding trough are damn near guaranteed at least a 100% return or so.  Why?  Because everyone else thinks so too.  Mass psychology at its finest.  The key is to not get greedy with alt coins.  Take your profits and run before the herd decides to do the same.

I am disappointed that there aren't more original coins out there.

Edit: Corrected typo

[disclaimer201]

I had hoped a low btc price might somehow sift out some of the useless coins out there, but instead we see new coins by the hour. An alt tribble invasion.

[arepo]

In the past, |d/dp alt coin avg price| > |d/dp btc price|, where d/dp = derivative of price.

this doesn't make sense to me. do you mean dp/dt where p = price and t = time?

d/dp looks like "derivative w/r/t price" but d/dp (price) = 1.

in context, with your talk of volatility, you're probably referring to the rate of change of price, dp/dt -- is that correct?

[traderCJ]

In the past, |d/dp alt coin avg price| > |d/dp btc price|, where d/dp = derivative of price.

this doesn't make sense to me. do you mean dp/dt where p = price and t = time?

d/dp looks like "derivative w/r/t price" but d/dp (price) = 1.

in context, with your talk of volatility, you're probably referring to the rate of change of price, dp/dt -- is that correct?

Yes, sorry, I meant dp/dt.  Sheesh I'm losing my mind.