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The Impact of Bitcoin on Altcoins: Is It Real?

adminFebruary 17, 2024
42 6 minutes read
The Impact of Bitcoin on Altcoins: Is It Real?
The Impact of Bitcoin on Altcoins: Is It Real? Everyone is wondering when altcoin season will begin, given that Bitcoin’s price cleared customs at Crypto La La Land and surpassed $40,000 on January 7, 2020. By “everyone,” we mean those who sold at $19,000. For the few altcoin holders who hung on throughout 2018’s “crypto winter”—when most altcoins lost as much as 95% of their value—the surviving frostbitten fingers are crossing their fingers. The so-called “sea of green” of cryptocurrency values is making more appearances on crypto indexes, which is making people optimistic. Many people feel that altcoins, which have had a terrible three years, are poised for a massive leap in 2021.
There is a strong correlation between the performance of Bitcoin and the so-called altcoin market, as any investor or trader with experience in cryptocurrencies other than Bitcoin can tell you. Altcoin values fluctuate with Bitcoin, sometimes rising dramatically and sometimes remaining unchanged. There are instances when altcoin values plummet twice as quickly as Bitcoin’s value during periods of severe market turmoil.
The impact of Bitcoin on alternative cryptocurrencies is complex and challenging to answer with a yes or no. As Bitcoin’s price rises and trading volumes soar, alternative assets are pushed to the sidelines. Given that Bitcoin controls 69% of the market by market cap, this is obvious. The recent record high for Bitcoin’s price was thought to spark a secondary bull run for other cryptocurrencies due to the positive momentum. The disappointment was typical of altcoins in that expectations were not met. Well, not in 2020, anyhow. The price activity in the first week of 2021 has left investors daring to hope, nevertheless, as numerous cryptocurrencies have seen their value more than double.

BTC’s 2020 Lift on Altcoins Applied to Only a Few Coins

Bitcoin officially broke $20,000 in late December 2020 and is now nearing $38,000. Bitcoin had a great year, while most cryptocurrencies lagged. Strangely, prominent altcoins like XRP, Ethereum, and Litecoin all rose relative to the US dollar. XRP’s SEC issues affected its price. The most fascinating Bitcoin vs altcoin match of 2020 was Bitcoin (BTC) vs. yearn. Finance (YFI) is a breakthrough new DeFi protocol.
Finally, “flippening,” YFI’s price surpassed Bitcoin’s by over $40,000. This was due to the project’s poor supply and DeFi’s rapid growth. Bitcoin has returned to its former importance, and while YFI is still close behind, BTC has maintained its pricing edge. Ethereum was expected to dethrone Bitcoin in 2017. That never happened. Instead, ETH fell until 2020.
While Ethereum was slow to get going in 2020, it gained steam in Q4 with the historic introduction of the Beacon Chain, which began the transition to the much anticipated Ethereum 2.0. Bitcoin eventually crossed the $20,000 mark, as promised. Since then, Ethereum’s price has soared beyond $1,000 and is now targeting its all-time high of $1,400, which it reached in 2017.
Like Ethereum, Ripple’s XRP has been trending recently. Before starting a protracted freefall that brought it to less than 12 cents during the past year, the cryptocurrency hit an unprecedented record high of $3.84 on January 4, 2018. On November 24, XRP reached a price of more than 70 cents, propelled by Bitcoin’s bull run and the Spark token airdrop by Flare Networks in December 2020. Following this, Bitcoin had a brief plateau. After the market leader continued to rise, the price of XRP started to fall. The SEC’s statement that XRP was security caused it to drop to less than 25 cents. But XRP was up 45 per cent again on January 7.

Ethereum Remains the Altcoin Gatekeeper

Ethereum Remains the Altcoin Gatekeeper

In past bull markets, Bitcoin has been at the forefront of the upswing before altcoins hopped on board. When Bitcoin hit its pinnacle, other cryptocurrencies quickly followed. Ethereum, the innovative platform that serves as the de facto crypto gatekeeper and is home to most ERC20 crypto projects, DeFi protocols, and smart contracts, falls between these two extremes. Like suckerfish on a pair of whales, altcoins are affected by what happens to Bitcoin and Ethereum.

There is a clear trend here, and it seems like it will keep happening. Along with Bitcoin’s bull run, altcoins often experience a pullback. The stabilization and completion of the rally by Big Brother Bitcoin is necessary for an altcoin uptrend to begin. While market analysts have drawn some conclusions, they are still very much in the realm of speculation. Before altcoins may have a substantial rally, the Bitcoin rally must stabilize, and the price of Ether must break out.

One of the most reliable cryptocurrency markets, second only in importance to Bitcoin, the price of Ether serves as a barometer for future market movements. Due to its role as a trailblazer during the initial coin offering (ICO) craze of 2017 and the subsequent rise of the budding decentralized finance (DeFi) industry in 2020, Ethereum asserts itself as the most reliable altcoin in the space. The increasing demand for DeFi technology tokens is one reason why Bitcoin trading volume has been on the rise. But if interest in DeFi tokens suddenly drops, the tide will turn in favour of Bitcoin.

Can Altcoins Lift BTC?

Can Altcoins Lift BTC?
In most cases, altcoins do not help Bitcoin’s value. Bitcoin was anticipated to experience a significant uptick in mainstream interest in cryptocurrencies following Facebook’s announcement of its Libra project in mid-2019. Since Libra (now Diem) attracted a lot of focus to the cryptocurrency market, Bitcoin benefited from it since it was the most prominent digital asset.

While cryptocurrencies claimed to be disrupting specific industries, the majority of them saw significant declines in value when Libra’s consortium of blue-chip partners included long-standing industry heavyweights. Due to regulators’ strong criticism, Facebook’s stablecoin project was renamed Diem. Bitcoin usually soon regains market share after altcoin pumps do their harm.

Altcoins Shoot Themselves in the Foot

Altcoins, not Bitcoin, are the primary focus of BTC’s support (or lack thereof) for them. In the cryptocurrency market, Bitcoin is considered the benchmark. You can trade the top digital asset on nearly every cryptocurrency exchange in the world since it is both liquid and completely decentralized. This fosters confidence among investors. But altcoins are a whole other ballgame.

Some alternative cryptocurrencies are better than others, while some are complete disasters in the making. Much of the initial coin offering (ICO) euphoria of 2017 has since collapsed, leaving investors in a state of financial misery. In reality, it is believed that 85 per cent of all initial coin offerings (ICOs) were frauds. The crypto industry’s surviving investors may have chosen to pool their resources into the most reliable assets. As the unofficial symbol of the cryptocurrency sector, Bitcoin is a no-brainer.

The term “exit scam” has also come to mean altcoins. Bitconnect, which stole almost $3 billion from its investors, is a prime example. Investors are avoiding dubious cryptocurrencies, even though the market isn’t as volatile as it was a few years ago. When investors flood into Bitcoin, it impacts the altcoin market as a whole. Altcoins are left in the dust by the vote of confidence in Bitcoin. Another consideration is liquidity. Despite the implausibility of a 51% attack, less popular cryptocurrencies have extreme price volatility due to a lack of market liquidity, which leaves them vulnerable to market and price manipulation by whales.

BTC’s Lift on Altcoins: Hope for the Future

Retail investors flooded the market in the early days of the cryptocurrency market. They were willing to put their money into any altcoin that offered the chance for rapid and explosive profit. Institutional investors are getting in on the action as the market goes through its usual ups and downs. There will be less of an emphasis on cryptocurrencies and more on Bitcoin. As a result, Bitcoin’s momentum remains favourable. Bitcoin has a long way to go before it can genuinely boost altcoins.

For the alternative cryptocurrency industry, Ethereum represents a glimmer of optimism, contrasting with Bitcoin’s gold. The so-called altcoin season may begin with the beginning of upward momentum for Ethereum. Now that Ethereum is launching attacks on all decentralized systems, altcoins have the enormous challenge of trying to reclaim a portion of Bitcoin’s market dominance. While this is happening, altcoin investors need to answer a simple question: Are you crypto or just a sucker?

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adminFebruary 17, 2024
42 6 minutes read

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