In the cryptocurrency market, the movement of altcoins is closely linked to the volatility of Bitcoin. Bitcoin, as the first and most popular cryptocurrency, remains the barometer that influences the performance of other currencies. With every rise in the price of Bitcoin, altcoins often rise as well. To understand this common behavior, the following main reasons can be analyzed:
1. **Psychological impact and general optimism in the market**
When Bitcoinâs value rises, the overall sentiment towards the cryptocurrency market improves. Bitcoin is the leader in the space, and when it succeeds, investors feel optimistic about cryptocurrencies as a whole. This positive sentiment prompts investors to look for new opportunities in altcoins, which increases demand for them and drives up their prices.
According to a study, Bitcoin is considered the âgold standardâ for cryptocurrencies, and any positive change in its value affects the overall market outlook, encouraging more money to be pumped into altcoins.
2. **Trading altcoins against Bitcoin**
Many altcoins are traded in pairs with Bitcoin. In other words, to buy a particular altcoin, investors sometimes need to use Bitcoin as an intermediary. When the value of Bitcoin rises, the value of these pairs also rises, which in turn increases the value of the altcoins. This makes altcoins look relatively attractive, and encourages investors to enter new trades.
3. **Transfer profits from Bitcoin to altcoins**
After making significant profits from Bitcoinâs rise, many investors tend to transfer part of their profits to altcoins in search of additional gains. This behavior is known as âaltseason,â where investorsâ interest in altcoins increases after Bitcoin breaks certain price levels. During this season, liquidity shifts from Bitcoin to altcoins, contributing to the rise in the latterâs prices.
4. **Bitcoin dominance decline**
When Bitcoinâs value rises, it can cause what is known as âBitcoin Dominance Decline.â Bitcoinâs dominance is the ratio of its market cap to the overall market cap of the cryptocurrency market. When this ratio falls, it means that altcoins are gaining in value relative to Bitcoin, indicating that liquidity is moving from Bitcoin to altcoins. This decrease in dominance leads to a boom in altcoin prices.
5. **The role of innovation and technology in alternative currencies**
In addition to general market factors, there are factors related to technological innovation in altcoins themselves. Many altcoins aim to offer new solutions and applications that are different from Bitcoin. These innovations attract investors when Bitcoin rises, as they see an opportunity to invest in emerging projects that could generate significant profits in the long run. This innovation increases demand for altcoins, causing their prices to rise in parallel with Bitcoin.
The rise of altcoins when Bitcoin rises is the result of a combination of psychological, commercial, and technical factors. Bitcoin plays a leading role in the market, and any success it has has a positive impact on other cryptocurrencies. However, altcoins can be influenced by additional factors, such as technological innovation and market trends, causing them to rise in parallel with or even faster than Bitcoin in some cases.
