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Author Topic: Why altcoins price fallow bitcoin price - economical explenation  (Read 251 times)
Tytanowy Janusz
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June 09, 2018, 08:30:28 AM
Last edit: June 11, 2018, 07:18:26 AM by Tytanowy Janusz
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 #1

Why do altcoin price fallow bitcoin price?
Why does that happend that fast and that precised?
Are they somehow connected?
Is it possible for altcoin to be independent of bitcoin price movent?


I've seen this questions manny times on this forum. Thats why I've decided to write post about it to give you guys econonomical explanation of this phenomen and also only post link to this when ill see another topic like that Smiley.

Introducion - why psychological explanation is not enought?

We all know that bitcoin is mother of all coins and "compass showing north or sounth for others" - this is psychological explanation. But if investors decision (to sell or not to sell) would be the only reason would this price change be that fast and precised. I mean if you look at btc/usd chart it looks almost the same as almost every altcoin chart (up and down peeks in the same time period). What is the percentage of people fallowing this concept "BTC - mother of coins - is going down omg i need to sell my alt as fast as possible " - even if its not connected to bitcoin - its not currency but utility token for example? I guess they are not strong enought to pull market up or down that much.

What is the main reason for that if psychological expenation is not enought?

Answer to this question is that they are economicaly conected.
Now 90-100% of any altcoin volume is made in pair alt/btc and only 0-10% in fiat/alt (https://coinmarketcap.com/currencies/neo/#markets neo for example). (ether is exception for that but we will talk about ether later)

When in 90% altcoin is traded by bitcoin than bitoin drop have to make price drop of altcoin. Why? Beacuse calculated price (btc value x altcoin value in bitcoins) is getting lower and lower because btc value is getting lower. Big USD market is making it more independent from bitcoin move, because arbitrage bots buys cheep bitcoin, cheep alft from it and sells it on usd market. So if its big enought it can cover bitcoin drop making alt/btc price incrise making ALT/USD stable. But USD maket is not big enought and fallowing sequence of events starts:

1-Bitcoin price drop.
2-calculated altcoin price $ drop (btc price * alt/btc price)
3-arbitrage bots buys altcoins for btc and sell on usd market making drop there (because its not big enought and loosing with alt/btc market) - without pushing alt/btc price higher enought to make investor buy beacuse usd market is too small to do that.
4-ALT/USD price drop
5-trading bots set to earn usd sells their coins (in most cases throught btc)
6-ALT/BTC and ALT/USD price drops even more
7-stoploses launches
8-ALT/BTC and USD/ALT price drop
9-now is the moment when investors makes decision to sell (only those who are on the market at this moment - previous steps takes only seconds cous they are totaly automatic) (some of them are selling because they see price drop and are running away, some on them sell because bitcoin is mother of coins, and some of them sell because they know that it must drop due to economical reason)
10-ALT/BTC and USD/ALT price drop
11-more and more investors sells - they also learn their lesson to sell when bitcoin drops because it alwais makes altcoin drops because bitcoin is mother of coins... (as you can see its not the only reason)

Thats why its so mechanical. Bitcoin drops and in the same second altcoin price drops.

Is there any chance that altcoins will be independent of bitcoin?

Yes. But only with USD/ALT volumen bigger than BTC/ALT volumen and investors confident about cryptocurrency (when one coin drop you jump to another instead of to USD to save dolars).

Bitcoin drop will not make alt/usd price drop only when USD market is big enought and also new investors buys this coin through bitcoin to increase alt/btc price to cover decrise made by arbitrage bots.
Ether is not that related to bitcoin because it has bigger USD market. https://coinmarketcap.com/currencies/ethereum/#markets
As you can see its more like 50:50 or 40:60 instead of 90:10 to 100:0 in other alts (alt/BTC : ALT/fiat). Thats why its price is more independent than other alts but still fallows bitcoin.

Think of it like this. Money are pumped into cryptocurrencies mostly by bitcoin (90-95%?) in some cases by ether or litecoin. So if any alt drops it only changes hands (someone who has bitcoin now has alt and someone who has alt now has bitcoin - amount of fiat pumped into market is still the same). When bitcoin drops it means that someone pulled money from whole market.

If you still dont get it ill expain it to you otherwise:

Imagine cryptocurrency world as RPG online game. There are gold coins that can be obtained in game and also equipement runes etc. If you want to lvl your characet faster you can buy gold coins on ebay to buy good equipement in game. If you want to buy best and very rare sword in game you need to buy goldcoins on ebay and than buy sword for goldcoins in game. How much is this sword worth? You can calculate it only through goldcoins (goldcoins price x sword price in goldcoins - for example u can say my sword in game is worth 100$ - without buying it for 100$ but buying coins for 100$). Now if goldcoin price drops on ebay than your sword is worth less. Because to sell it you need to go throught goldcoins. Thats makes your sword price vulnerable to 2 factors.

In cryptocurrency world everything looks the same but the fact that 90% of volumen of altcoins (sword) is traded through bitcoin (goldcoins) (not 100%). But those 10% is not strong enought to hold price.

Altcoins are for me only multiples of bitcoin price. Its price is made by 2 factors - bitcoin price(goldcoins price) and multiplier (sword price in goldcoins). Multipier depends on various things like hype, news, team, whitepaper, possible future of project etc (like in game - rareness, beeing the best sword, look).




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June 09, 2018, 07:48:38 PM
 #2

What's about coins that are not traded with Bitcoin?
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June 10, 2018, 05:16:02 AM
 #3

What's about coins that are not traded with Bitcoin?

They fallow coin that they have bigger volumen at (like some of etherum tokens). Funny thing could be when any of coin will overtake bitcoin (for example ripple). Will still bitcoin be a compass or mayby this coin will become that? I think, but im not sure, that as long as bitcoin will still be "goldcoin" as long evey "game item" will depends on its price.




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June 10, 2018, 09:30:21 AM
 #4

I think this is to some extent because of that most coins rise speculatively and with increasing number of people in the crypto like bitcoin, so when bitcoin decreases most of altcoins also decrease.

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June 10, 2018, 11:32:55 AM
 #5

Quote
Now 90-100% of any altcoin volume is made in pair alt/btc and only 0-10% in fiat/alt

This proves that all altcoins are useless pump&dump tools and they don`t have any real value.Their value is  just a derivative from the value of bitcoin.We should all stop buying and holding altcoins and focus only on bitcoin.If there weren`t any altcoins,the bitcoin price might have been 30K USD by now.


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June 10, 2018, 12:04:10 PM
 #6

Quote
Now 90-100% of any altcoin volume is made in pair alt/btc and only 0-10% in fiat/alt

This proves that all altcoins are useless pump&dump tools and they don`t have any real value.Their value is  just a derivative from the value of bitcoin.We should all stop buying and holding altcoins and focus only on bitcoin.If there weren`t any altcoins,the bitcoin price might have been 30K USD by now.

I'm waiting for the moment where alt coins will no longer be tied so bad to the price of Bitcoin and fall everytime Bitcoin falls.
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June 10, 2018, 12:53:25 PM
 #7

Looks like a feasible explanation why altcoin drops with BTC price.
 But now how you can explain Altcoin price increase with the BTC price increase because I noticed that when BTC USD price increases, Altcoins BTC value increases.

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Tytanowy Janusz
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June 10, 2018, 03:40:20 PM
Last edit: June 10, 2018, 05:09:57 PM by Tytanowy Janusz
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 #8

Looks like a feasible explanation why altcoin drops with BTC price.
 But now how you can explain Altcoin price increase with the BTC price increase because I noticed that when BTC USD price increases, Altcoins BTC value increases.

Very good question.

1-Bitcoin price goes up.
2-calculated altcoin price $ goes up(btc price * alt/btc price)
3-arbitrage bots sells altcoins for btc and buy them on usd market making pumping there (because its not big enought and loosing with alt/btc market) - without dumping alt/btc price enought to make investor sell beacuse usd market is too small to do that.
4-ALT/USD price incrise
5-trading bots set to earn usd buys their coins (in most cases throught btc)
6-ALT/BTC and ALT/USD price incrise even more
7-now is the moment when investors makes decision to buy(only those who are on the market at this moment - previous steps takes only seconds cous they are totaly automatic) (some of them are buing because they see price incrise, some on them buys because bitcoin is mother of coins, and some of them buys because they know that it must drop due to economical reason)
8-ALT/BTC and USD/ALT price drop
9-more and more investors buys - they also learn their lesson to buy when bitcoin goes up because it alwais makes altcoin pump because bitcoin is mother of coins... (as you can see its not the only reason)

As you can see i only changes a little and it looks logical (at liest to me - i would love to discuss if it dont looks logical for You)

Interresting things happends when bitcoin is rising too fast !!
If you havent seen that beafore there is link - sorry for poor quality. I was recording it beeing drunk using my phone:p
https://vimeo.com/274354783

Bitcoin was at 11% up this day. And as you can see just starged big run what cauesd altcoin drops. (very short term)

1-Bitcoin price pump.
2-calculated altcoin price $ goes up(btc price * alt/btc price)
3-arbitrage bots sells altcoins for btc and buy them on usd market making pumping there. Spread is that huge that bots can make huge transactions to still be on profit. This makes ALT/BTC goes down a litle
4-ALT/BTC goes down
5-trading bots are chasing bitcoin instead of buying alts (not so sure about that)
6-stoploses set on alt/btc price (this pull alt/btc down more)
7-ALT/BTC goes down
8-now is the moment when investors makes decision (their decision would be to jump on the running train (thats why bitcoin rising too fast is sucking money out of altcoins)
9-ALT/BTC and USD/ALT price drop
10- more and more inveswotrs are runnig to catch bitcoin


Quote
Now 90-100% of any altcoin volume is made in pair alt/btc and only 0-10% in fiat/alt

This proves that all altcoins are useless pump&dump tools and they don`t have any real value.Their value is  just a derivative from the value of bitcoin.We should all stop buying and holding altcoins and focus only on bitcoin.If there weren`t any altcoins,the bitcoin price might have been 30K USD by now.

Well to be honest im not so sure that existance of altcoins decrise bitcoin value. When you first think about it you might think that someone who would invest in bitcoin now has other coin. But think of it like a RPG game. Does good sword decrise goldcoin value in $? No, good sword incrise demand on goldcoin because gamers want that sword and to buy it you need to buy goldcoins - if you dont have enought in game (RPG allegory - jump to last acapit of my first post). Lets talk about it !!




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tuansemazi
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June 10, 2018, 04:09:12 PM
 #9

With the market price still depended on Bitcoin, a boom in Bitcoin will signal the steep growth of other altcoins, especially for the Altcoin co-workers who have a hard working team.
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June 10, 2018, 05:22:57 PM
 #10

All alternative currencies are tied to bitcoins and bitcoin is a trading pairs to altcoins. Besides, bitcoins volume is so huge that a little push of it can affect all other coins.
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June 12, 2018, 10:16:01 AM
 #11

Bitcoin is the first crypto currency,  and have so much fund tired to it that a little push in price affect the whole market, although psychological effect is also a factor affecting the market as traders tend to react to every news.
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June 12, 2018, 10:27:19 AM
 #12

this is a good explanation and it is probably the reason why it is happening but also there is another reason for it.

to know the reason you first have to understand that altcoins have no use other than being speculative assets where traders buy into in order to make profit for a short term. (and I am talking about traders not newbies who come in the market and buy randomly and hold on tight thinking they will become rich some day). now the question is profit on what? mostly profit on bitcoin but also profit on their fiat.
so whenever bitcoin price is going down they have either bitcoin or altcoin or fiat which is stuck in the altcoin market.
if you have bitcoin you want to pull your orders from altcoin market and move it to bitcoin/fiat market to sell so that you have money when the dip is over and buy at the bottom and in the end have more bitcoin => profit
if you have altcoins then you want to dump them mainly because you know they are going down but also to have funds to buy bitcoin at the bottom => profit
if you have fiat you also want to pull your orders from altcoin market and move to bitcoin so that you can buy more bitcoin at the bottom => profit
you see it all ends in profit. and when people either dump their altcoins or pull their buy orders the altcons get dumped hard and fast because there is no buy support anymore to prevent it. this is also why you always see a bigger drop in altcoins. like bitcoin goes down 5% but altcoins like ETH, XRP, BCH, LTC,... go down 10%

EMPTY
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June 12, 2018, 01:17:38 PM
 #13

if you have bitcoin you want to pull your orders from altcoin market and move it to bitcoin/fiat market to sell so that you have money when the dip is over and buy at the bottom and in the end have more bitcoin => profit
if you have altcoins then you want to dump them mainly because you know they are going down but also to have funds to buy bitcoin at the bottom => profit

I think that these are reactions of trader who is 100% certain that altcoin will drop during bitcoin drop. Thats why he is droping profitable open trades to have fiat to rebuy bitcoin when its reach bottom. If altcoins would not fallow bitcoin he could stay on his alt possition and sell at bitcoins bottom to jump there with bigger amount of fiat. Altcoins would act oposit to bitcoin.

But he is 100% sure of that becouse of economical correlation. Thats why he is droping good trades adding extra dip and making altcoins drop 10% when bitcoin drop 5%




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August 09, 2018, 12:05:46 PM
 #14

Altcoins are for me only multiples of bitcoin price. Its price is made by 2 factors - bitcoin price(goldcoins price) and multiplier (sword price in goldcoins). Multipier depends on various things like hype, news, team, whitepaper, possible future of project etc (like in game - rareness, beeing the best sword, look).

And the multiplier can be said ICO.
If the ICO is good and has something different from others like creating something new then I make sure that the ICO will be good for the future.

Bitcoin can be expensive because Bitcoin is the first cryptocurrency created.
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August 09, 2018, 11:48:22 PM
 #15

Why do altcoin price fallow bitcoin price?
Why does that happend that fast and that precised?
Are they somehow connected?
Is it possible for altcoin to be independent of bitcoin price movent?


I've seen this questions manny times on this forum. Thats why I've decided to write post about it to give you guys econonomical explanation of this phenomen and also only post link to this when ill see another topic like that Smiley.

Introducion - why psychological explanation is not enought?

We all know that bitcoin is mother of all coins and "compass showing north or sounth for others" - this is psychological explanation. But if investors decision (to sell or not to sell) would be the only reason would this price change be that fast and precised. I mean if you look at btc/usd chart it looks almost the same as almost every altcoin chart (up and down peeks in the same time period). What is the percentage of people fallowing this concept "BTC - mother of coins - is going down omg i need to sell my alt as fast as possible " - even if its not connected to bitcoin - its not currency but utility token for example? I guess they are not strong enought to pull market up or down that much.

What is the main reason for that if psychological expenation is not enought?

Answer to this question is that they are economicaly conected.
Now 90-100% of any altcoin volume is made in pair alt/btc and only 0-10% in fiat/alt (https://coinmarketcap.com/currencies/neo/#markets neo for example). (ether is exception for that but we will talk about ether later)

When in 90% altcoin is traded by bitcoin than bitoin drop have to make price drop of altcoin. Why? Beacuse calculated price (btc value x altcoin value in bitcoins) is getting lower and lower because btc value is getting lower. Big USD market is making it more independent from bitcoin move, because arbitrage bots buys cheep bitcoin, cheep alft from it and sells it on usd market. So if its big enought it can cover bitcoin drop making alt/btc price incrise making ALT/USD stable. But USD maket is not big enought and fallowing sequence of events starts:

1-Bitcoin price drop.
2-calculated altcoin price $ drop (btc price * alt/btc price)
3-arbitrage bots buys altcoins for btc and sell on usd market making drop there (because its not big enought and loosing with alt/btc market) - without pushing alt/btc price higher enought to make investor buy beacuse usd market is too small to do that.
4-ALT/USD price drop
5-trading bots set to earn usd sells their coins (in most cases throught btc)
6-ALT/BTC and ALT/USD price drops even more
7-stoploses launches
8-ALT/BTC and USD/ALT price drop
9-now is the moment when investors makes decision to sell (only those who are on the market at this moment - previous steps takes only seconds cous they are totaly automatic) (some of them are selling because they see price drop and are running away, some on them sell because bitcoin is mother of coins, and some of them sell because they know that it must drop due to economical reason)
10-ALT/BTC and USD/ALT price drop
11-more and more investors sells - they also learn their lesson to sell when bitcoin drops because it alwais makes altcoin drops because bitcoin is mother of coins... (as you can see its not the only reason)

Thats why its so mechanical. Bitcoin drops and in the same second altcoin price drops.

Is there any chance that altcoins will be independent of bitcoin?

Yes. But only with USD/ALT volumen bigger than BTC/ALT volumen and investors confident about cryptocurrency (when one coin drop you jump to another instead of to USD to save dolars).

Bitcoin drop will not make alt/usd price drop only when USD market is big enought and also new investors buys this coin through bitcoin to increase alt/btc price to cover decrise made by arbitrage bots.
Ether is not that related to bitcoin because it has bigger USD market. https://coinmarketcap.com/currencies/ethereum/#markets
As you can see its more like 50:50 or 40:60 instead of 90:10 to 100:0 in other alts (alt/BTC : ALT/fiat). Thats why its price is more independent than other alts but still fallows bitcoin.

Think of it like this. Money are pumped into cryptocurrencies mostly by bitcoin (90-95%?) in some cases by ether or litecoin. So if any alt drops it only changes hands (someone who has bitcoin now has alt and someone who has alt now has bitcoin - amount of fiat pumped into market is still the same). When bitcoin drops it means that someone pulled money from whole market.

If you still dont get it ill expain it to you otherwise:

Imagine cryptocurrency world as RPG online game. There are gold coins that can be obtained in game and also equipement runes etc. If you want to lvl your characet faster you can buy gold coins on ebay to buy good equipement in game. If you want to buy best and very rare sword in game you need to buy goldcoins on ebay and than buy sword for goldcoins in game. How much is this sword worth? You can calculate it only through goldcoins (goldcoins price x sword price in goldcoins - for example u can say my sword in game is worth 100$ - without buying it for 100$ but buying coins for 100$). Now if goldcoin price drops on ebay than your sword is worth less. Because to sell it you need to go throught goldcoins. Thats makes your sword price vulnerable to 2 factors.

In cryptocurrency world everything looks the same but the fact that 90% of volumen of altcoins (sword) is traded through bitcoin (goldcoins) (not 100%). But those 10% is not strong enought to hold price.

Altcoins are for me only multiples of bitcoin price. Its price is made by 2 factors - bitcoin price(goldcoins price) and multiplier (sword price in goldcoins). Multipier depends on various things like hype, news, team, whitepaper, possible future of project etc (like in game - rareness, beeing the best sword, look).

You can see that the current market is fluctuating at bitcoin prices, only a small correction of bitcoin prices can make the prices of altcoin fall sharply. Therefore, when dealing altcoin you always need to track bitcoin price to be able to handle all possible situations in time. The market is bearish in the long run so bitcoin prices may drop sharply at any time.
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August 12, 2018, 04:07:47 PM
 #16

In long time BTC is one of the most bullish assets. In medium term btc is bearish. Thats why BTC may also pump in any moment. Like gasoline. Its liquide and cold but 1 indicator and we will all forget about bear market (it might be ETF)




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