Does Bitcoin's decline affect other cryptocurrencies?
Yes, Bitcoin price decline usually affects most other cryptocurrencies, but it depends on certain factors. To understand the relationship, let’s dive into the topic in a simplified way:
1. Bitcoin as a Market Leader
• Bitcoin is the first and largest digital currency by market capitalization.
• Many consider it a fundamental indicator of the market, and other currencies usually move in a similar direction.
• When the price of Bitcoin drops, investors get worried and start selling other currencies, causing the entire market to fall.
2. Correlation between currencies:
• Most digital currencies move in a correlation with Bitcoin.
• If Bitcoin goes down, other currencies, especially those with small market cap, follow the same trend.
• Stablecoins may remain stable because they are pegged to other assets such as the dollar.
3. Exceptional cases
• Sometimes, other cryptocurrencies may decouple from Bitcoin's influence, especially if there is positive news about that currency.
• Example: If a major company announces a partnership with a certain currency, its value may rise even if Bitcoin is falling.
4. Does the decline only affect Bitcoin?
• If the decline in Bitcoin is due to its own problems (such as government regulations), other currencies may be less affected.
• However, if the decline is due to general market anxiety or major economic events, the impact will be felt by everyone.
Brief research:
• Study from CoinMetrics (2021):
I found that most cryptocurrencies move with Bitcoin with a correlation of up to 70%.
• Analysis from Binance Research (2020):
She pointed out that Bitcoin sets the mood of the market, and altcoins usually follow in the same direction.
Simple summary
• If Bitcoin goes down, other currencies will likely go down.
• However, some currencies may act independently in rare cases.
• Don't just rely on the Bitcoin trend, always analyze the coins you invest in.