Crypto Market Dynamics
Bitcoin only makes up about 40-50% of the market’s liquidity. There are thousands of altcoins, and they work in correlation with Bitcoin.
Not understanding these correlations can lead to poor and costly investment decisions. Those who make money trading crypto understand these dynamics like the back of their hand.
There are three situations for how Bitcoin and altcoins affect one another:
- The whole market crashes. In such a case, Bitcoin will often be more resilient than the other coins. We witnessed this firsthand in 2018: Altcoins dropped ~95%, while Bitcoin dropped ~80%.
- Bitcoin’s dominance increase. Bitcoin’s price increases sharply, but altcoins remain stable or go down. We witnessed this in September 2017 - November 2017.
- Bitcoin’s dominance decrease. Bitcoin rises gradually, and altcoins increase in price substantially. We witnessed this in December of 2017.
All of these time frames can be viewed using coinmarketcap.com. Take your time and look at different historical time frames to help you better predict the future market!
Takeaway: if you think the market is ready for a bull run, then add more altcoins to your portfolio. On the other hand, if you believe the market is going down, sell your altcoins for Bitcoin, or even better, for fiat or stablecoins.
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