We talked about the necessity of Altcoins in our last article. However, here’s a fun fact. Did you know that Bitcoin’s price movement generally affects altcoin prices? The relationship isn’t always predictable, but there are some common trends.
The main currency in cryptocurrency markets is Bitcoin. Altcoins tend to fund the buying of Bitcoins. The Vice Versa is also true. If we accept this is true, then it follows that Bitcoin prices are affected by Altcoin prices.
When Bitcoin prices suddenly rise for whatever reason, two things happen.
- It will reduce the price of Altcoins. This is because Altcoins are being converted into Bitcoins.
- It will increase the price of Altcoins. This happens when new people are joining the network. An influx of new money helps increase the price of Bitcoins.
Bitcoin prices can also fall. When this happens, one of two things occur.
- Altcoins rise in value. This happens as people convert Bitcoins into Altcoins.
- Altcoins fall in value. This is a result of people taking money out of Crypto Currency.
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).
This means that people who watch the price of Bitcoin closely, can predict the prices of Altcoins as well. This will come in handy when mining the crypto currency of your choice. For example, if you see Bitcoins fall, you need to observe two things. Is there some new crypto currency craze happening? If yes, Altcoins will rise too.
Is there some warning about Altcoins? Then Altcoins will fall.
Trading can be uncertain, so every little bit helps. If you can logically understand why your mined Bitcoin is going up or down, you can better implement any strategy and ease a little of the worry that can come with holding.
To summarize this, Bitcoin is the center of the crypto economy in many ways. With Bitcoin trading pairs on every exchange, the gravity of Bitcoin is hard to escape. This becomes true even more when you realise how most Altcoins are bought with Bitcoins. For this reason, understanding the economy of Bitcoins is very important for any miner, so he knows what to do with his holding.