In the world of digital currencies, there is a star that never dims… it is Bitcoin $BTC , the crowned king that leads the market movement and influences the decisions of investors and the sentiments of the entire market. But, how and why do other cryptocurrencies move behind it? Let's find out!
1. $BTC = General market indicator
When Bitcoin rises, we often see other currencies (altcoins) follow suit. This market effect is known as the 'Dominance Effect' – where Bitcoin represents a gauge of general market confidence.
When Bitcoin rises, investors feel secure and open their appetite for risk towards altcoins.
2. A close relationship between Bitcoin and 'liquidity'
Bitcoin absorbs liquidity in the market when it rises sharply, leading to a temporary decline in the prices of other currencies. But when Bitcoin stabilizes, liquidity gradually shifts to altcoins, initiating what is known as 'Altseason' – the season of altcoin rallies.
3. Bitcoin as a 'Digital Safe Haven'
In times of panic or negative news, investors rush towards Bitcoin as the safest and most stable digital asset, leading to a decline in other currencies.
4. News affecting Bitcoin = affects the entire market
Whether it's related to ETF approvals or statements from central banks, any significant event affecting Bitcoin immediately reflects on the rest of the currencies, either rising or falling.
Summary: Understand Bitcoin to understand the market
If you are trading or investing in cryptocurrencies, watch Bitcoin's movement first. Because in most cases, what BTC does today... other currencies do tomorrow.
