We all already know that Bitcoin is the most popular cryptocurrency that defines the whole market. The BTCs rates may go up and down, but it’s still the most wanted crypto, and people are often saying that it’s the gold asset for that market. Altcoins are the other cryptos that may or may not be related to Bitcoin. Usually, they follow the ups and downs and stay correlated to it. But, their prices never reach that high, so they are more stable compared to Bitcoin.
There are cases when their prices don’t change at all, even though there are huge changes for Bitcoin. So, we can say that there is some correlation between Bitcoin and altcoins, but no one can claim how dependent are they on each other.
It’s more likely that it may affect some of the existing cryptocurrencies – but not all of them. There are currencies that are made to be completely independent of the fiat finances, but also from the crypto fluctuations. If you want to keep track of what’s happening, you can visit this go URL and check how things are changing. You may also come up with your own conclusion if Bitcoin somehow affects the other coins, or it’s just a coincidence that you can’t avoid while being active on this market.
Bitcoin is not stable as it seems
One thing we know for sure is that BTC is a pretty volatile currency, which means it can rise and fall daily. On the other hand, this cryptocurrency is well-established, and people are more and more interested in it, especially after the prices are changing – no matter if they go up or down.
In many countries, it’s forbidden to trade cryptocurrencies and they are considered an illegal activity. But, the truth is that no investment is not risky. We can say that probably it would take a little more time until the whole world is ready to embrace cryptocurrencies as equal to fiat money. That’s probably the moment when the market will have a chance to develop more, and the altcoins to become more stable and less dependent on Bitcoin.
What should we know about altcoins?
First thing, you need to know that there are at least 3,000 of them, and it’s normal that some of them are tied to Bitcoin’s price, but others can function without any influence. In recent years, people learn to recognize their potential and appreciate them more than usual.
The reason why many of them are tied to BTC is that it’s the most dominant currency on the market. All the other prices are compared to the current BTC price. Surely, when something is that big and powerful, it has a huge influence over the other things too. But, that can be a reason for some developers to decide to stand alone, and represent their product and concept, so they can show they are worthy too.
Another reason why most of the altcoins depend on Bitcoin is that they can’t be purchased using fiat money. The investor should first buy some Bitcoins and then trade them for the altcoins by choice. Also, if you want to sell them, you will have to convert them back to BTC, and then sell them for fiat money. Knowing all of this, we can say that most of the altcoins are tightly tied to the one that runs the whole market.
Altcoins don’t necessarily drop when the BTC drops
This is one of the things that is the most difficult to understand. But, even though most of these alternative coins are related and tied to the “crypto gold”, they don’t necessarily rise when BTC rises, or drop when it drops. Sometimes, our favorite cryptocurrency may fall a lot, but the other coins stay stable, no matter how tightly tied they are to it.
That’s why the crypto experts usually say that it’s really not easy to keep track of this market or to try to predict how things will go. Even the Bitcoin forks (altcoins derived by it) are not that stuck to them, as it seems. Sometimes it changes without affecting any of the existing currencies that are popular at the moment.
The phenomenon of correlation
As you can see, we already used this term before in this article. But, do you know what it means? It’s the behavior of one currency that is completely dependent on another. It’s a huge trend on the crypto market, and there are more altcoins that are related to Bitcoins than those who run without them.
BTC was, is, and will be the most popular currency for years, and it will literally create the trends that the other cryptos will follow. In the past, they were more tied to it, but after the huge crash from 2017, the developers and providers learned the lesson, and they found ways to keep these currencies stable enough, so their prices won’t change a lot.
The correlation is still here because we can’t ignore something big like Bitcoin’s part on the market cap. Some of the most popular, but also correlated currencies are Ethereum, Ripple, and
Litecoin. If you track their charts for a specific period, you will see that they copy BTC’s behavior, following the trend it defines. Sometimes they are a little late, about a month or two, and it seems like they don’t depend on the BTC.
Bitcoin and Litecoin have a similar way of working, but they can move in a completely different direction at the same time. Ethereum moves similar to Bitcoin, but with at least a one-month delay. Ripple follows that trend, but not strictly as it seems.
The concept of correlation is not unknown to the people, since some of the fiat currencies are tied to some asset or to each other. Understanding it can be difficult, and no one can explain it that well as you can realize it by yourself, as you take actions on the market. So, it’s always better to try it by yourself, instead of trying to learn it from books.