If you’ve been following the crypto market, you might have noticed something: when Bitcoin (BTC) goes down, almost every other cryptocurrency follows suit. This isn’t just a coincidence—it’s built into the way the crypto ecosystem works. Here’s a breakdown of why Bitcoin is the anchor for the entire market and why its price movements ripple through all altcoins.
1. Cryptocurrencies Are Priced in Bitcoin
On most blockchains and exchanges, Bitcoin serves as the base currency for valuing other cryptocurrencies. For example:
• Altcoin A might be worth 0.0001 BTC.
• Altcoin B might be worth 0.002 BTC.
Even though we often talk about cryptocurrency prices in USD or stablecoins like USDT, their true value on the blockchain is measured in BTC first, then converted to USD. This means that when BTC’s price in USD changes, it directly impacts the USD value of every altcoin.
2. The Formula Behind Altcoin Pricing
Let’s simplify it with an example:
• If Altcoin A is worth 0.0001 BTC and Bitcoin is priced at $50,000, then Altcoin A’s value in USD is:
0.0001 × 50,000 = $5.
Now, if Bitcoin drops to $40,000, Altcoin A’s USD value automatically drops to:
0.0001 × 40,000 = $4.
This happens even if the altcoin’s price in BTC terms remains the same. This formula connects every cryptocurrency’s USD price to Bitcoin.
3. Bitcoin’s Role as the Anchor
The reason this happens is simple: Bitcoin is the foundation of the cryptocurrency market.
• Historical Dominance: Bitcoin was the first cryptocurrency, and for years, altcoins were only tradable against BTC. This historical structure still shapes how the market functions today.
• Liquidity Provider: Bitcoin remains the most liquid crypto asset, and many altcoins depend on BTC trading pairs for price stability.
• Psychological Benchmark: Investors see Bitcoin as the “gold standard” of crypto. When Bitcoin falls, it signals weakness, creating panic across the market.
4. Stablecoins Like USDT Are Secondary
While stablecoins like USDT (Tether) have become popular for trading and storing value, the market still relies on Bitcoin as the primary measure of value. The typical pricing flow looks like this:
1. Altcoin → BTC: Cryptocurrencies are first valued in BTC.
2. BTC → USDT: Bitcoin’s value is then converted to USD or USDT for fiat comparisons.
If Bitcoin’s price in USD drops, it creates a domino effect: altcoins lose value in USD terms, even if their BTC prices remain stable.
5. What Happens When BTC Falls?
When Bitcoin experiences a price drop, it triggers a series of events across the market:
1. Altcoins Lose Value:
As BTC’s USD price drops, the USD value of all altcoins automatically decreases due to the pricing structure.
2. Panic Selling:
Investors often sell altcoins to move into BTC or stablecoins like USDT, amplifying the sell pressure on altcoins.
3. Market-Wide Fear:
Bitcoin is seen as the backbone of crypto. When its price falls, it spreads bearish sentiment across the entire market.
6. Why BTC Sets the Tone
Bitcoin’s dominance is both structural and psychological:
• Trading Pairs: Many altcoins are still traded in BTC pairs, creating a direct link between their value and BTC’s price.
• Collateral Systems: BTC is widely used as collateral in DeFi protocols and wrapped assets like WBTC. A drop in BTC value can trigger liquidations, further affecting the market.
• Global Liquidity Anchor: Bitcoin’s liquidity and market cap make it the “reserve currency” of the crypto world.
The Bottom Line
Bitcoin is the foundation of the cryptocurrency market. Its price movements ripple through every altcoin because all crypto assets are valued relative to BTC first, and then converted into fiat or stablecoins. This relationship ensures that when Bitcoin rises, it lifts the market, and when it falls, it drags everything down with it.
Understanding this connection can help you navigate the market better and anticipate trends. If you’re watching Bitcoin, you’re essentially watching the pulse of the entire crypto world.