Before you buy an altcoin, understanding its relationship with bitcoin and price fluctuation is important. Understanding their relationship can help you maximize your knowledge about the crypto world and help you to obliterate your portfolio. This understanding includes altcoin’s sales and acquisitions, price fluctuations, and different market caps.
Correlation between Bitcoin and Altcoins
The historical correlation between Bitcoin and altcoin prices tends to be volatile. Here are the main causes for this correlation:
To procure an altcoin, you have to acquire a bitcoin first, and then you can obtain altcoins using those digital assets. In addition, if you buy bitcoin and its value rises, you will only get a few altcoins due to expensive transactions.
There remains a great deal of uncertainty surrounding the cryptocurrency (decentralized) market.
- This includes some quarters where there is a long-term future for altcoins.
- Moreover, this uncertainty means any negative media coverage surrounding Bitcoin tends to affect the altcoin market too.
Both of these factors are shrinking though. Secondary markets are emerging that allow you to buy altcoins with Ethereum (ETH) or Litecoin (LTC).
In addition, investors have started to understand that some altcoins are very different from bitcoins, have a significant advantage over bitcoins, and that their fortunes will not necessarily be the same.
The trends between Bitcoin and Altcoins
As with a decentralized market, you can learn a lot about price fluctuations by studying past trends.
After doing detailed research, we came up with the following statements regarding the normal relationship between bitcoins and altcoins.
1. When BTC moves slowly, altcoins tend to rise rapidly.
Investors are eagerly awaiting BTC gains and are beginning to expand their search with promising altcoins for quick profits.
2. When BTC gains momentum, the price of altcoins tends to fall.
Not only do altcoins go alongside BTC procurement, but traders also tend to convert their altcoins backed to BTC to make profit.
3. When BTC depreciates, altcoins tend to drop even more.
Due to the low liquidity, panic sales occur faster and hit investors harder. However, altcoins recover faster, which means miners can make huge profits if they play well in the market.
Will the correlation between bitcoins and altcoins disappear?
There are indications that the correlation between bitcoins and altcoins may decrease further. There are more signs that secondary markets will soon allow the purchase of altcoins without bitcoins coming out.
Moreover, Bitcoin’s total cryptocurrency market share is significantly lower than in previous years and continues to decline.
After the hype around Bitcoin’s rise to $ 19,000, people are beginning to see more downsides to the original cryptocurrency, such as high fees and a slow network. So, there’s now a growing interest in how altcoins can improve Bitcoin.
However, until cryptocurrency generally becomes more established, it seems likely that the price of bitcoin will have a significant impact on your other cryptocurrency investments.