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Before we begin exploring how different crypto assets are affected by the flagship cryptocurrency, we must first learn the difference between both the categories.
Bitcoin is the pioneer crypto asset in the market that jumpstarted the crypto space.
BTC is not only known to be the first and largest digital currency in the world but holds more significance than that. It massively dominants the overall crypto market, which causes price fluctuations for other altcoins as well.
Here you will learn more details about the difference between Bitcoin and other cryptocurrencies and how their price movements are related.
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What is Bitcoin?
Bitcoin was launched in 2009 and is the world’s first digital crypto asset. Since then, it has developed and evolved to become the “crypto king” that has a lot of influence on the crypto market.
The flagship digital asset was created as a universal digital currency that would offer more financial independence to people. Bitcoin’s creator, Satoshi Nakamoto believed the traditional financial system to be faulty and fallible because it heavily depends on central banks and governments.
Bitcoin, on the other hand, was created as a peer-to-peer digital asset with a limited supply. The purpose was to create an asset that would not only hedge against inflation but also be accessible to anyone around the globe.
This novice project started out with a handful of miners and users and has now expanded into a trillion-dollar financial system that not only created the entire crypto industry but also revolutionized the financial system of the world.
Bitcoin is now the world’s most prominent digital asset and is being embraced by more and more individuals, companies, organizations and even countries. In short, the significance and value of the crypto king is unwavering and is speculated to surge higher as time goes by.
What are Altcoins?
The term “altcoin” is a combination of the words, “alternative” and “coin”. It is used to refer to every other cryptocurrency or token in the crypto market apart from Bitcoin.
Some of the most popular altcoins that have attracted billions of dollars in investment include:
While this is in no specific order, Ethereum is the most prominent altcoin and is even anticipated to outperform the crypto king in the future (as per ETH enthusiasts).
The main reason for altcoins to exist is to merely increase the demand and value of Bitcoin. Even though trading markets focusing on ALT/ALT and crypto/fiat trading pairs are important, the primary focus is one the BTC/ALT trading pair.
The prices of altcoins are also heavily impacted as the price of Bitcoin increases or decreases. This is one of the points people often ponder on, especially those who have newly stepped foot in the crypto space.
Here are a few factors that influence the price movement of altcoins as the price of BTC moves.
Bitcoin was the First
Bitcoin is the most prominent digital asset in the world and is the first of its kind. Its creation inspired the development of other crypto coins, but none quite like it.
Even though Bitcoin is under a lot of pressure and scrutiny, the attention it has received has allowed it to have a solid store of value.
Bitcoin has paved the way for other cryptocurrencies to move into the mainstream and has pioneered the entire crypto industry. Due to this, it has an unwavering value and significance, and every interested party owns at least some amount of the flagship crypto asset. Therefore, regardless of other options available in the crypto market, Bitcoin is likely to always stand out.
Dominance of Bitcoin in the Market
Bitcoin being the first crypto asset of the world, has a lot of significance that is undeniable. Since it is what facilitated the establishment of the overall market, it heavily dominates the crypto market as well.
As the price of Bitcoin falls, the investors familiar with the value of BTC aim to buy the dip. For this reason, they take their funds out of other altcoins and invest in Bitcoin. This is one of several reasons why the price of altcoins decrease as the price of Bitcoin does too.
Altcoins are Bitcoin Clones
It is no surprise that some altcoins are a clone of the crypto king, it being the pioneer of the crypto industry. The popularity and value of the flagship digital asset has been increasing, despite its price movement.
This is why, there have been Bitcoin clones in the market, one of which is Litecoin.
Litecoin (LTC) was the first altcoin that was adopted vastly. It has been created using a copy of the Bitcoin code and aims to be a lighter and faster version of Bitcoin.
Other clones of the crypto king in the market are as follows:
- Bitcoin Cash
- Bitcoin Diamond
- Bitcoin Gold
Most Secure Network
Bitcoin is based on the most secure network. It is the proof-of-work (PoW) mechanism and is a decentralized network. The entire mechanism functions with the help of 18 million miners.
The large number of participants of the network, have a high effect of decentralization of the network. This ensures a high-end and remarkable security offered by the Bitcoin payment system.
The infallible or impressive level of security offered by the Bitcoin network is one of several reasons why it surpasses the altcoins in the market.
Reserve Currency of the Crypto Market
Bitcoin has a powerful position in the crypto market as the U.S. dollar has in the global stock markets. This is why, the crypto community and investors consider BTC to be a reserve currency of the crypto market.
Due to regulatory strictness and other compliance issues in some parts of the world, most crypto trading platforms do not offer crypto-to-fiat trading. Therefore, a large number of crypto investors start by purchasing Bitcoin, trade it with other altcoins and then look for opportunities to benefit from it afterwards.
Crypto traders who are more seasoned and experienced compare the price of altcoins with Bitcoin as the BTC/ALT trading pairs have a higher significance in the market.
These are some of the factors that highlight how the price of altcoins is correlated to Bitcoin’s price. However, people who wonder “what should I do when crypto market falls?” should consider investing in a more prominent digital asset such as Bitcoin.
Bitcoin is the original digital asset and lead to the creation and expansion of the entire crypto industry. In short, Bitcoin has a prominent and unwavering position in the crypto market, which adds to the reasons why it impacts the prices of other altcoins so much. However, if you are new to the crypto space, you should know what drives the market sentiment when it comes to the crypto king. The above-mentioned reasons can help specify how the altcoins are correlated to Bitcoin when it comes to price movement.
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