It is important at this time to understand why altcoins do not have the same upward momentum as Bitcoin and why they sometimes do not go along with it.
In the world of cryptocurrencies, there is a strong correlation between Bitcoin and altcoins. Altcoins often follow the movement of Bitcoin, but sometimes altcoins do not see the same rise when Bitcoin rises. To understand this behavior, we must review several factors that affect the movement of altcoins compared to Bitcoin.
1. **Focus on Bitcoin as a safe haven**
Bitcoin is considered “digital gold” by many investors. When the market is volatile or unstable, investors prefer to shift their investments to Bitcoin due to its large market cap and relative stability. In these cases, investors may sell altcoins in order to buy Bitcoin, which causes the price of Bitcoin alone to rise, while the price of altcoins remains stable or even falls【15†source】.
2. **Lack of liquidity in the market**
Liquidity is an important factor in determining price movement in the cryptocurrency market. When Bitcoin rises, there may be a lack of liquidity available to support the rise of altcoins at the same time. In other words, liquidity can shift from altcoins to Bitcoin, leaving altcoins without enough support to rise.
3. **Bitcoin Dominance Rise**
Bitcoin Dominance refers to the ratio of Bitcoin’s market cap to the total cryptocurrency market cap. When Bitcoin Dominance rises, it represents the concentration of liquidity and investment in Bitcoin at the expense of altcoins. In such periods, it is difficult for altcoins to make gains, as they lose some of their liquidity to Bitcoin.
4 **Reliance on technical factors and separate projects**
Altcoins often rely on technical projects separate from Bitcoin, such as developing smart contracts or improving transaction speeds. Sometimes, these projects may not see positive developments or news that push prices higher, while Bitcoin rises due to other factors, such as increased demand from financial institutions or regulatory developments in certain countries.
5. **Altseason is delayed**
There is a concept known as “altseason,” which is a period when altcoins experience significant rallies after a period of Bitcoin stability. During times of Bitcoin rally, altcoins may take longer to respond and move higher. Altcoins typically wait for the Bitcoin price to stabilize before they start attracting liquidity and making gains.
A
Although Bitcoin and altcoins often move together, there are times when Bitcoin outperforms altcoins in terms of rising.
That is, altcoins need Bitcoin to rise and then stabilize to start rising. Investors can benefit from understanding these factors to anticipate future market movements and make informed investment decisions.
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