The behavior you are observing is common in the cryptocurrency market, and can be explained as follows:
1. Bitcoin as a market leader:
Bitcoin ($BTC ) is the first and largest cryptocurrency by market capitalization, and is considered a leading market indicator. When Bitcoin goes up, investors feel confident in the market as a whole, which pushes other currencies (altcoins) up.
In contrast, when Bitcoin falls, the market loses confidence, causing altcoins to fall further due to their highly volatile nature.
2. Liquidity effect:
Bitcoin attracts more liquidity than altcoins due to investor confidence and its large market size.
When Bitcoin goes up, investors rush to buy it, which causes liquidity to flow away from altcoins and cause them to rally in a limited manner.
When it goes down, investors leave altcoins first because they are riskier and less stable compared to Bitcoin.
3. High volatility of altcoins:
Altcoins are often more volatile than Bitcoin due to their smaller market cap and lower trading volume.
Therefore, when the market is rising, altcoins may gain relatively less, but when they fall, their losses are more severe due to their sensitivity to selling pressure.
4. Impact of market cycles:
During bullish periods, investors initially head to Bitcoin, as it is less risky. After making big gains in Bitcoin, investors move to altcoins, known as “Altcoin Season.”
During bearish periods, investors first abandon altcoins in favor of Bitcoin or stablecoins (such as USDT) to minimize losses.
5. Psychological factors:
Bitcoin is considered a “safe haven” in the cryptocurrency market. In times of uncertainty or decline, investors tend to move out of more volatile altcoins and into Bitcoin or stablecoins.
a summary:
Bitcoin sets the tone for the market, but it is less volatile than altcoins. So when it goes up, Bitcoin benefits first and is more stable, and when it goes down, altcoins suffer more due to less liquidity and higher risk.
If you are trading altcoins, it is important to follow Bitcoin's movements carefully as it is a leading indicator of what will happen to the rest of the market.
