Bitcoin ($BTC ) is the most popular and influential cryptocurrency in the market, making it the first to be affected by any major fluctuations. But why exactly does Bitcoin reach “scary” numbers, whether up or down, more than others?
1. Leadership and market dominance
Bitcoin is the first cryptocurrency to be created, and it is the most prominent in terms of market capitalization and popularity. As a result, it controls the movement of the entire market, as it is used as a primary reference for evaluating other currencies. When Bitcoin fluctuates, the entire market often follows suit.
2. Interest of major institutions
Bitcoin is the first choice for large investors and financial institutions, such as hedge funds and banks. Decisions to buy or sell in large quantities directly affect Bitcoin more than other currencies.
3. The impact of news and media
Bitcoin gets the lion’s share of media coverage, both positive and negative. Any regulatory or economic developments quickly affect it because of the heavy focus on it as an indicator of the state of the digital market.
4. Limited supply (scarcity)
Bitcoin’s supply is limited to just 21 million coins. This means that any change in demand or large moves by “whales” (large investors) can lead to sharp price swings.
5. Sensitivity to the global economy
Bitcoin is considered a “digital safe haven,” which makes it very sensitive to global economic crises, such as inflation or rising interest rates. When investors move to safe assets or move away from risk, the price of Bitcoin is directly affected.
6. Weak liquidity
Despite its popularity, Bitcoin’s liquidity is still limited compared to traditional asset markets, making it susceptible to strong volatility when trading in large volumes.
What about other currencies?
Other cryptocurrencies often follow Bitcoin’s movement, but they can sometimes appear more stable due to less trading. However, they are still more susceptible to random fluctuations due to their dependence on Bitcoin’s performance.
Conclusion
Bitcoin occupies a unique position that makes it the most sensitive to market changes. Its popularity, scarcity, and trading volume by major institutions make it the primary indicator of the state of cryptocurrencies, which explains why it has reached “scary” levels compared to other currencies.