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Why Altcoins Usually Follow Bitcoin (BTC)?

Why Altcoins Usually Follow Bitcoin (BTC)?

The cryptocurrency industry is full of thousands of cryptocurrencies. Bitcoin almost always leads from the front.There are currently more than 3,000 altcoins or non-Bitcoin cryptocurrencies. Generally, altcoin prices follow Bitcoin’s. This is because altcoin buyers often buy Bitcoin with fiat currency to exchange for the altcoin of their choice.

Since Bitcoin brought the birth of the cryptocurrency industry in 2009, the famous cryptocurrency asset has been used to buy pizza; it has now become the sixth largest currency in the world.However, Bitcoin does not cover all cryptocurrencies; In the first decade of the cryptocurrency industry, the number of cryptocurrencies in existence has increased exponentially. CoinMarketCap now has over 3,400 altcoins and cryptocurrencies, with the exception of Bitcoin. Also, these have many different use cases.

Most of the time though, altcoin prices are closely tied to the bitcoin price and follow it closely. Okay but why?

Bitcoin’s Dominance Over the Crypto Money Market

The main reason behind the rise of altcoins after Bitcoin is that altcoin prices are usually measured in Bitcoin. The leading crypto asset may be surrounded by over 3,000 competitors, but still owns more than half of the entire cryptocurrency market. This dominance of the cryptocurrency market gives Bitcoin a lot of influence and control.

As a result, the value of an altcoin is usually measured relative to the price of Bitcoin, so if Bitcoin falls, the price of altcoins may fall and conversely, if Bitcoin rises, the price of altcoins may rise.

Michael Dunworth, CEO of Wyre, a company that uses blockchain technology to create effective ways of transferring money , summed up the situation by saying, “You will usually have a leader and everyone follows the leader because they are all connected.

As we’ll discover, this basic rule isn’t always true, but there is also something to be said for Bitcoin to act as the reserve currency for the largest crypto exchanges.

Bitcoin as Reserve Currency for Exchanges

Globally, there are just over 2.6 million Bitcoins on cryptocurrency exchanges, according to Glassnode. In June 2020, the total amount of Bitcoin held on exchanges reached its lowest level of the year at 2,310,466.

When there is an increase in Bitcoin output on the industry’s biggest exchanges, investors tend to view it as a positive sign for the currency. This is because investors are waiting for Bitcoin to enter an accumulation phase, meaning a bull market could be just around the corner. This trust can leap to competing altcoins and benefit the wider cryptocurrency market.

There Are Many Reasons

As we can see, there are many reasons why altcoin prices generally follow Bitcoin. However, it is because altcoins are experiencing an increase in value, while Bitcoin’s value sometimes falls. One main reason for this is that, with a careful eye, investors are pulling money from their Bitcoin investments and instead turn to promising altcoins.

Conversely, if Bitcoin experiences a bull run on its own, investors can revert to the leading cryptocurrency to enjoy a ride on their own.

There may be thousands of cryptocurrencies on the market today, but Bitcoin will still remain the leader.

Samuel Hegi

Samuel Hegi , who first became acquainted with blockchain technology in 2014, is highly critical of blockchain technology. Samuel Hegi, a journalism graduate from the University of Brighton he is the editor-in-chief of the news portal. Blockchain is love.

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