Digital currencies are a type of cryptocurrency that relies on blockchain technologies to secure and record transactions.
Bitcoin, as the first and most famous digital currency, is considered the basis and reference for the rest of the digital currencies.
The relationship between Bitcoin and other digital currencies is evident in several main points
1. The leading role of Bitcoin:
Bitcoin is the first, most widespread and valuable digital currency. When digital currencies started to spread, Bitcoin was the main reference. Therefore, Bitcoin remains a major influence on the cryptocurrency market.
2. Trust and liquidity:
Bitcoin has the largest trading volume and highest liquidity in the digital currency market. Therefore, any change in the price of Bitcoin can affect investors' confidence in the market as a whole. When Bitcoin rises, optimism and confidence in the market increase, causing the rest of the currencies to rise. Conversely, when it declines, confidence declines, causing the rest of the currencies to decline.
3. Psychological effect:
Bitcoin unofficially represents the “headliner” of the cryptocurrency market. Many investors follow Bitcoin's performance to determine the general market trend. Therefore, changes in the price of Bitcoin can affect investment decisions for other cryptocurrencies.
4. Technological overlap:
Many digital currencies are based in one way or another on the technology and concepts created by Bitcoin. Therefore, any changes to Bitcoin could affect the technical and technological performance of other currencies
5. Strategic relations:
Some cryptocurrencies are directly linked to Bitcoin through trading pairs. For example, if there is a trading pair between Bitcoin and one of the other currencies, any change in the price of Bitcoin can directly affect the price of the other currency.
6. Common market:
On trading platforms, Bitcoin is usually a major gateway to trading other digital currencies. Many currencies can only be traded via Bitcoin, which enhances Bitcoin's influence on the market as a whole.
Summary of the relationship:
Bitcoin has a significant impact on other digital currencies due to its leadership role, high liquidity, psychological influence, technological overlap, strategic relationships, and common market. Therefore, it is natural that the rise or fall in the price of Bitcoin will greatly affect the rest of the digital currencies.
