Why the fall in the price of Bitcoin affected other altcoins

[Muenalo]

I am sure many will be wondering or perhaps having the same motion as mine that why is it that whenever the price of bitcoin falls, other altcoins follow suit by falling. Even when these altcoins have different developers and it's different uses.
However, altcoins (which are coins other than bitcoin) normally follows the price movement of bitcoin, and as such, when bitcoin falls, these coins tend to lose more of their value, but that's not all, there may be also other reasons behind that fall and that's the main reason for me writing this article, to elaborate more on what correlation bitcoin has to other altcoins, which I will be sharing with you below.


1. Trading Pair:

With this I mean, since bitcoin plays an important role in all exchanges, been the first cryptocurrency, and a major trading pair, which other cryptos(altcoins) are been paired with, followed by the likes of Ethereum and USDT. When its value falls, there is a high tendency that the others will follow suit too, as the values of most of these altcoins rely on the current price of bitcoin.

For example:
    XRP/BTC

XRP/BTC  (which implies that the price of the XRP somehow rely on the price of bitcoin)

And secondly, when a new coin is listed on an exchange, that coin is either paired with Bitcoin, Ethereum, or USDT, which are major trading pairs. So when its value falls, there is a great probability the new coin will fall too.



2. Investors and traders of the crypto market:

With this, I mean that the activities of traders when the price of bitcoin rise and falls also affect other coins too. And here is how it works. When the price of bitcoin goes up, the price of altcoins are forced to go down, as the liquidity of those altcoins are been transferred to bitcoin, as traders sell their altcoins just to buy more bitcoins as the price climbs high in other to make more profit, and when the price falls, the traders sells his coin for a stable coin like USDT, BUSD, and USDC, since he knows that as the price of bitcoin falls, also will other altcoins do, causing a less in demand for those altcoins and drop in price.



3. The use of fundamentals:

By this I mean, since most coins rely on the price movement of bitcoin, even when they have their different developers, projects, and use cases. If bitcoin falls, they tend to lose value, but if bitcoin rises, they also tend to add a little value positively.


4. Bitcoin Dominance:

With this I mean, how much percentage bitcoin has of the total cryptocurrency market cap. Because bitcoin been the first cryptocurrency and a major coin has the highest percentage of more than 50% in the market cap. And this means that when the value of bitcoin dominance is rising or huge, it means that the buying power is on the side of bitcoin compared to altcoins, which usually causes a fall in the price of altcoins. But if the Bitcoin dominance is going down, it means that the buying power is on the side of altcoins, making their prices pump.


So In conclusion, these are how the price of bitcoin and other altcoins correlate. Hence, whenever the price of bitcoin is affected, there is a high probability altcoin will also be affected.
 

So thank you so much for finding out time to read this researched article of mine.

I remain your humbled junior member.
Thanks

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[pooya87]

However, altcoins (which are coins other than bitcoin) normally follows the price movement of bitcoin,

They don't "follow" bitcoin, they get dumped each time bitcoin price makes big move whether it is rising or falling won't change their dump.
For example take the shitcoin called Ethereum for example. During February when bitcoin went from $36k to $58k, ETH got dumped about 25% from 0.04 to 0.03.

4. Bitcoin Dominance:

This doesn't affect anything.

[tranthidung]

Please see a topic that will give you some clues

• Bitcoin pumps/ dumps and altcoin price actions (2013 - 2020)
• I did not repeat that analysis for a while but it can answer your question.

Simply explanation (visit that topic to see variable notes)

• Boxes are for 50% of price fluctuations (in all observed days in specific period). Lower and upper whiskers are for the 25th and 75th percentiles.
• Simply said, boxes and whiskers can help you to see how wide or narrow price changes (as % in that analysis)
• Discoveries: Altcoins dump more than Bitcoin
• Cut-offs: BTC pump (or rise): >= 5%, BTC dump (or fall): <= -5%. It is more accurately to use rise and fall but I mentioned pump and dump because it was initially included in chart descriptions.

[fara_buduk]

everything is following bitcoin....i guess it's wrong not all want the price trend to follow bitcoin because many of them are more likely to be less significant than bitcoin in price spikes and we can see the percentage in coinmarketcap

[Tytanowy Janusz]

XRP/BTC  (which implies that the price of the XRP somehow rely on the price of bitcoin)

They are economically conected due to triangular arbitrage trading:
https://bitcointalk.org/index.php?topic=4444348.msg39704417#msg39704417

But this connection is not as strong as it was few years ago when 90% of ALTs volume was paired with BTC. Today its not. All major altcoins are paired with USDT and USDT trading pair has always 3-10 times bigger volume than BTC/ALTcoin. This connection will be weaker and weaker in contrast to habits of people that are more and more convinced that alts fallow BTC. Are like BTC on small leverage without liquidation price.

BTC price dump is not only thing resposible for alt crash. Its also BTC volatility during dump (-32% daily amplitude 19.05.2021). Low volatility on BTC makes daytraders trade altcoins.

[marine4u]

Because bitcoin is the most powerful currency, it has a powerful “invisible” power – like a king.  Bitcoin is the driving force behind everything and the birth of today's blockchain world.  Bitcoin is always on everyone's mind and it is the factor that creates great dependence.  Charts, technical analysis, proven market history.

[Helpme_please]

Market Confidence,  this is the be main reason why altcoin mostly follow bitcoin price movement. As major coins in cryptocurrency , bitcoin volatility influence investor's behaviour in market. They will feel confidence if bitcoin soar , and also altcoin will dumped if bitcoin that recognized as mother coins drop due some negative sentiment.

[Ararbermas]

most of the performance of the projects nowadays is depends on the situation of the market conditions..not because of bitcoin wherein if it fall most of the alts will do the same movements? Nope that's wrong. Infact there are some scenarios that when bitcoin fall most of alts are rapidly increasing and when bitcoin rocketed alternative will fall as well and it's because they're not connected and most investors prefer to jump where they can obtain profits when bitcoin is struggling and they're doing the same way when alts experience bearish..

[anu1908]

i think we should stop posting whatever ideas we have to answer the thread title. op already post some reasons, that are repeated on the new posts. while the wording is different, the point is more or less the same.

[BobK71]

No coin will follow Bitcoin to Dump and pump. Since all tokens are traded in BTC pairs, when the price of Bitcoin goes up or down, the rest of the tokens are also affected.

[livingfree]

Bitcoin has become a trend in general from year to year, so anything related to cryptocurrency cannot be separated from the influence of Bitcoin and when someone says cryptocurrency, they immediately think of Bitcoin and nothing else.

As usual, bitcoin is always the key to the crypto market.

And do not be surprised anymore to see that whenever bitcoin gets a plunge, every altcoin is being affected by it. With all of those factors that have been said, I cannot think of any addition to it.

There's the thought that the whole market is all about bitcoin despite its dominance is being divided into altcoins too.