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How does the Bitcoin exchange rate affect Altcoins?

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The emergence of Bitcoin in 2009 ushered in an era of change in global financial relations. Due to the stability of its algorithm and issuance, Bitcoin gained popularity among large investors very rapidly. So far, no critical vulnerabilities have been identified in the blockchain that could undermine the foundations of the entire cryptocurrency market. Altcoins, in turn, are closely linked to Bitcoin, their fate depending on the formation of initial demand around this digital currency. Nearly half of all cryptocurrency investments are in BTC, including it in large investment portfolios as the primary asset.

The Proof-of-Work consensus mechanism keeps Bitcoin functioning. This means that the security of users and transactions is ensured by millions of miners around the world, making up Bitcoin’s decentralized network. The more participants in the network, the more decentralized and therefore more secure it is.

Dependence of alcoin rates on Bitcoin

Bitcoin undeniably tops the market capitalization ranking among all cryptocurrencies. Most trading operations are conducted in pairs with BTC, which makes it the undisputed leader. This is reflected on the largest exchanges, where the bulk of liquidity is held in this particular cryptocurrency. In 2017, there was a meteoric rise in altcoin investments, but Bitcoin’s share was still an impressive 40% of the total market, with Ethereum lagging behind by a factor of two. As of 2024, Bitcoin’s dominance remains largely unchanged.

Percentage of total market capitalization (dominance)
Percentage of total market capitalization (dominance)

The best cryptocurrency exchange to trade or build a portfolio is Binance.

Limited issuance and growing investor interest are the key factors explaining Bitcoin’s constant price growth. Demand for it is steadily growing, and the limited number of coins creates conditions for a stable upward trend. Note that many major payment systems give priority support to BTC before paying attention to altcoins. This phenomenon creates additional pressure in favor of Bitcoin price growth.

It is important to note that there are other factors that influence the relationship between different cryptocurrencies. Aspects such as technological innovation, market regulation and the widespread adoption of blockchain technology also contribute to shaping the dynamics of the cryptocurrency market. This complex web of interconnections creates additional elements of unpredictability and variability in the world of cryptocurrencies.

  • The mood of large investors largely determines the dynamics of the cryptocurrency market. Cryptocurrencies become an attractive inflation protection mechanism, which leads to increased demand, especially during periods of decline in stock markets and indices. It is in these situations that digital assets are often seen as a sustainable alternative to traditional investments.
  • In addition, competition in the cryptocurrency industry is constantly fueled by improvements in protocol algorithms. This leads to the emergence of new industries such as decentralized finance (DeFi), which has reached a volume of $100 billion in a short period of time and continues to show positive dynamics. Thus, coins that do not meet the new market requirements face the risk of losing demand or even disappearing altogether.
  • It should also be noted that the lack of real value is one of the challenges for cryptocurrencies. Bitcoin, being a high-tech product, is a complex valuation object for traders based mainly on supply and demand. This is a situation in which many cryptocurrencies are valued relative to BTC, which itself is also devoid of attachment to physical objects, highlighting the difficulty of determining their real value.

Altcoin volatility

The volatility of altcoins is noticeably lower than that of Bitcoin, which makes it easier to predict their exchange rate. This is due to several factors. First, the price of altcoin is closely related to the price of the main cryptocurrency on the market. Second, the altcoin rate depends on the liquidity of a particular token. When an altcoin is backed by a reliable team, advanced technology, and a successful business, it becomes analogous to a company’s stock.

Altcoins are in an active state of growth because the exchange rate of the main cryptocurrency at the moment is often subject to manipulation. Owners of Bitcoin can sell it to acquire more tokens, and thus altcoins follow their predecessor.

The movement of the altcoins’ exchange rate is directly related to that of the main currency. Despite their lower volatility, this is ensured by their active development and ability to replace company shares. When predicting the growth dynamics of altcoins, it is best to focus on the trends of Bitcoin, which still remains in the center of attention and has a significant impact on the entire cryptocurrency market.

More factors affecting the altcoin exchange rate

  1. News. Publications in media services have short-term shifts on the exchange rate chart. Especially negative news, for example, a ban on mining in China caused a fall in the cryptocurrency market.
  2. Politics. Legalization of mining and cryptocurrencies leads to increased demand and spread of electronic coins as a means of payment. Crypto ceases to be a toy of enthusiasts, and enters everyday life for mutual settlements.
  3. Public trust. The expansion of the field of application of digital coins increases their popularity. This is due to new technological processes aimed at reducing transaction fees and increasing speed. Society is showing interest in cryptocurrencies and their rate is increasing.
  4. Security. A positive incentive for increasing demand for such assets is the impossibility of hacking most blockchains with modern computing power.

Which altcoins are least dependent on Bitcoin?

The interconnection of cryptocurrencies is well demonstrated by the table with the correlation of the main coins, which is compiled on the basis of statistical data.

How does the Bitcoin exchange rate affect Altcoins?
1Asset movements are synchronized and they react equally to external factors
0Quotes fluctuations are completely independent of each other
-1Movement in opposite directions

Coins resistant to Bitcoin volatility

Some altcoins show resistance to BTC volatility, demonstrating successful and stable growth. This success is due to the consistent development of the project. Traders stop relying solely on the rate of the main currency and begin to actively explore secondary factors. This marks the beginning of an entire “season” for the growth of such coins, some of which are able to impress with their profits exceeding 100%.

It is critical to remember that when everyone around you starts talking about the rise of an altcoin, it stops its downward trend. Likewise, when predictions of empire are heard, the altcoin stops losing value. With Bitcoin’s exchange rate striving to stabilize, some coins may even begin their ascent faster, surpassing the growth of the main cryptocurrency.

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