At the beginning of 2022, the miners and traders of the virtual money exchange were negatively surprised by the drastic fall of the coins. This was a kind of a slap in the face that brought them back to the reality that being part of this world is not easy and great. In its long history, with almost ten years of existence, Bitcoin has seen a nearly 50% decline from its highest value ever. This news was quite shocking for those who had invested quite a lot of money and believed in its potential. But as if that wasn’t enough, altcoins have also lost a lot of their market value.
Why did this cryptocurrency crash happen? Why did other coins follow suit as Bitcoin fell, and they lost some of their market value? Many people in the world of cryptocurrencies are constantly asking themselves these questions and asking for answers. The situation simply did not make sense to them and they tried in every possible way to unravel the mystery behind this happening.
So if you belong to this group of people who have doubts about the connection between the fall of Bitcoin and the fall of other coins, we are here to solve this mystery for you and explain to you what their connection is and why all this is happening. So stay with us until the very end to find out the answers to these questions.
Bitcoin was the first coin introduced to us, its first entry on the scene was about a decade ago. He was the first coin to be recognized by the public, the first virtual money to start this whole story.
Its existence was quite long before the other coins appeared. Today we can meet thousands of them on the stock market of virtual cryptocurrencies, and with each new day, new fresh ones appear who try to deserve their place and their existence. But many of the new cryptocurrencies do not last long, they fail to survive in this market for so many reasons. Let’s put aside these currencies that have failed to match the first and original coin that appeared, and dwell a little on those who try to keep up with it, such as Ethereum, Tether, Cardano, Doge coin, Solana, and many others.
Why do these coins follow the state of Bitcoin and when it falls the value of the altcoins falls, and vice versa when the value of Bitcoin rises, the value of other coins also increases?
There are several very interesting reasons why this is happening in the cryptocurrency market, and these are the following:
1. Bitcoin is like the mother of other coins
Bitcoin started this whole story, if it did not exist, altcoins would not have appeared and been created. Bitcoin plays the role of mother, and altcoins are her children. It dictates how other cryptocurrencies should behave. When we are born, as we grow up, we follow and mimic the behaviors of our parents, we learn from them what is right and what is not. So in the world of virtual money, altcoin learns and follows the behavior of the creator. When they notice that the value of Bitcoin is declining, altcoins try to mimic it and follow this behavior, aha okay we have to do what the original coin does, so their value drops.
2. All altcoins exchange rates are being priced against Bitcoin
To see how much an alternative coin is worth, we must first convert it to Bitcoin value to see what its exchange rate is in US dollars. Take Ethereum for example, it is currently worth $ 2700, the price of this cryptocurrency is actually the relation of the Bitcoin exchange rate with the US dollar. When the price of Bitcoin falls, the other currencies follow this event, and their price decreases because all other currencies are based on the Bitcoin exchange rate and not on the US dollar exchange rate.
But there are situations when, for example, the value of the original coin decreases, but altcoins do not follow this behavior, on the contrary, their price in the cryptocurrency market increases. This often happens in the world of virtual money. When can we notice such a situation?
This can only happen in one situation, and that is when investors who have invested in Bitcoin will suddenly withdraw their money and redirect it to another cryptocurrency. As the investor suddenly lost interest in the original coin and became interested in investing in alternative crypto, the price of altcoin increased. However, this can last for a very short time, in a short period of time, and after a while, their prices return to their original state.
The cryptocurrency exchange is the same as the stock exchange. When a company that belongs to one sector starts to operate negatively, this is pretty bad news for the other companies that belong to that sector, because at this point people start to panic and buy and sell shares without any logical explanation. There is chaos on the stock market that will take time to return to normal and the shares to start driving the green wave, ie to grow.
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I hope it has now become a little clearer to you why coins behave the way they do, and why they follow the fall or rise of Bitcoin. Although currently, the cryptocurrency exchange is not the brightest, this can change overnight and their price can rise dramatically. All you have to do is follow the Bitcoin price movement, which will be able to predict how other altcoins will behave.