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):

In general:

The main currency in the 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.

The super simple version of the pattern is this:

  1. BTC steady = alts run = be in alts
  2. BTC runs = alts stagnate in dollars and drop in BTC as people sell alts for BTC = be in BTC
  3. BTC drops = everything drops, alts will even tend to drop harder than BTC = be in dollars or stable coins

With that said, things aren’t always so simple, instead for each of the three conditions above there are actually two things that tend to happen depending the specific circumstances.

When Bitcoin goes up quickly, it will likely:

  1. Suppress or depress alts as money flows into Bitcoin (alts might hold their dollar value, but they will tend to lose BTC value);
  2. Or, take alts along for the ride (generally true when a new wave of adoption is occurring). This is the number one thing we are looking for in crypto, a market wide bull market. When BTC and alts go up you generally are better off being in alts (because they tend to outpace BTC’s gains).

When Bitcoin goes down quickly (for example after a highly anticipated fork), it will likely:

  1. Depress alts as money flows into fiat. This is the worst thing that can happen in crypto for bulls. Many will want to flee to the safety of dollars and stables;
  2. Or, cause alts to boom (especially in terms of BTC pairs, where you trade BTC for alts) as money flows out of BTC and into alts (this is not common, but it can happen that some or all alts heat up while BTC cools off, in these times you might hear “insert coin here” is the next Bitcoin). Be cautious with alts in a market like this, there has yet to be an alt that overtook BTC or didn’t go through a nasty correction phase.

When Bitcoin stagnates, it will likely:

  1. Cause alts to stagnate along with it or even drop as people wait for a clear sign on the direction of the market (this is often true if we are at a decision point like “BTC sitting under $6 resistance or at $6k support”);
  2. 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 the #1 thing you are looking for in terms of trading alts or investing in alts for the short term. This tends to happen when BTC is forming a bottom after dropping or is consolidating after a nice run. TIP: Looking at the Bitcoin dominance chart can help here.

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.

Put all that together, and you’ll realize that in many cases the key time to play alts is after BTC has run or dropped and is stagnating or moving slowly. Meanwhile, in many cases the worst time to play alts is when BTC is rallying or dropping.

The above isn’t always the case, but it does tend to be the case.

Knowing the above 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.

TIP: Any time alts drop they may get a bounce. A bounce is a nice little 5% – 10% or so move up in a downtrend. These can occur when BTC goes up, drops a bit, and then goes up again. On that last reversal that bullish BTC action may make alts heat up for a moment. It takes skill to play bounces, but with the help of a trading bot and time and attention it is doable. Still though, mostly with alts what you do is wait until you think you spot a bottom, accumulate, and then wait until the next alt season. otherwise as a rule of thumb, Bitcoin is the king of the crypto market and most of the time you’ll want to be in BTC or stables / dollars.

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What do you think?

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Ghadaffi Khalid on

Hi, thanks for your informative article.
I have a question.
If me and my team about to develop our own blockchain tech and codes from scratch, and doesn’t want to apply for BTC as our based currency for pairing (use fiat or USDT), what could possibly go wrong?
I would appreciate if you could explain your thought on this matter. Thanks.

Thomas DeMichele on

So I assume you are talking about applying to have your coin listed on exchanges, but wanting those exchanges to list it for USDT and not BTC.

That is an interesting question that I don’t have an answer to.

I will say this though, it seems to me like it is easier to get listed on BTC pairs than it is to get listed on USDT pairs. I assume the criteria is more stringent and the fees higher for listing. Just look at Bittrex, only the top coins are offered in USDT pairs.

To your point, what could go wrong? I assume what could go wrong is a problem of thin markets. If you aren’t offering your coin in BTC pairs, you have less traders able to access your coin. So one potential problem volatility. Honestly I don’t have enough data or knowledge in this area to give you any sort of decent answer.

I bet your best resource will be opening a line of communication directly with exchanges and asking them.

Good luck with your ventures though.

Ghadaffi Khalid on

Thanks for your prompt reply.

Exactly! From my early research on this matter, it is seem almost impossible to get listed in any known exchange to use fiat or tether as our base currency to trade.

Although I haven’t officially asked any of those exchangers yet, I am pretty sure I need to have a huge liquidity and a stable market using BTC or ETH as its base on any exchanger for some time. Unless me and my team create our own DAX, and make people use our coin as its base, instead of using those giants. 🙂

It’s ok bro. Keep posting good articles. Thanks and all the best to you too.

Thomas DeMichele on

Thanks for the kind words and the insight, if I ever get a clear sense of how the process works I’ll write something up for the site.

dajosova on

Excellent article. Very well summarized.

Josh on

Would that explain why my account on binance is showing I’ve lost money from my original investment. Regardless of the fact if I look at my trades in terms of eth(I buy my alts with eth) I’ve made substantial gains.
Example being
I sent say $140 in eth from Coinbase to binance on the 7th. And just in the amount of time the transfer took, the deposit amount on Binance was almost 10% LESS then I sent over from Coinbase. So while I sent $140 once on Binance I only had $126 to actually trade with

Thomas DeMichele on

Because ETH is down against BTC and BTC down against the dollar even profitable trades in ETH might be down in BTC and down in dollar amounts.

So essentially, sure, this could be the case (if ETH drops 10% while you are transferring, then the dollar amount of ETH is -10% when you trade it; also remember there are some transaction fees for sending your ETH).

If you are focusing on accumulating ETH by trading alts, then you might want to just ignore the dollar and BTC values of ETH. Essentially you are long ETH (which has been really depressing for all of us recently). Depressing aside, if you are long ETH you are saying “I believe in ETH long term, and I am going to ignore the current market conditions and keep accumulating.” From that frame your goal should be number of ETH gained, not BTC amounts or dollar amounts.

More like a little mental trick to keep you on your game than a reality as to how money works… but point being, don’t count your worth in dollars or BTC if ETH accumulation with alts is your goal. Count your worth in ETH. If you are gaining ETH, then from a frame where we only consider ETH, you are doing well.