Bitcoin’s price movement generally affects altcoin prices. The relationship isn’t always predictable, but there are some common trends.
In simple terms, here are some trends that have historically occurred (NOTE: each future event is an independent event and anything could happen, these are just trends to watch for; do your own research and make your own investment choices):
The main currency in cryptocurrency markets is Bitcoin (fiat currency, ethereum, and Tether are also used, but Bitcoin is the primary currency). Given this, alts tend to fund Bitcoin runs and Bitcoin tends to fund alt runs. Given this relationship, Bitcoin price movements (or lack thereof) tend to effect altcoin prices.
When Bitcoin goes up quickly, it will likely:
- Suppress or depress alts as money flows into Bitcoin;
- Or, take alts along for the ride (generally true when a new wave of adoption is occurring).
When Bitcoin goes down quickly (for example after a highly anticipated fork), it will likely:
- Depress alts as money flows into fiat;
- Or, cause alts to boom (especially in terms of BTC pairs, where you trade BTC for alts) as money flows into alts.
When Bitcoin stagnates, it will likely:
- Cause alts to stagnate along with it as people wait for a clear sign on the direction of the market;
- Or, cause alts to boom as people look for returns in alt coins and try to get favorable trades in terms of BTC pairs. <—- This is what happened in December 2017 and January 2018 (this is what you are looking for in terms of alts, when BTC stagnated alts saw epic growth).
To summarize, Bitcoin is the center of the crypto economy in many ways, and with BTC trading pairs on every exchange, the gravity of Bitcoin is hard to escape. This only becomes more true has people start to “take gains” or “cut losses” from alts to buy Bitcoin when it goes on a run, and tend to “go to alts” or “go to fiat/USDT” when Bitcoin stagnates or drops.
This is a bonus for people who watch Bitcoin’s price closely, as it can help tell you about what the entire market will do!
For example, if you see a BTC buy wall or sell wall starting to break, there are some expected outcomes to be looking for (for example, you would be expecting alt prices to go down quickly, and would know to buy or sell depending on your strategy).
The crypto space can be uncertain, so every little bit helps. If you can logically understand why your BTC is going up or down, and why your alts are going up or down, you can better implement any strategy and ease a little of the worry that can come with holding.