#Altcoin usually fluctuates more than Bitcoin in response to macroeconomic data. According to analysis by Matt Mena, a strategist at 21Shares, the theory of “reflexivity” by legendary investor George Soros can explain this phenomenon.
Reflexivity and the crypto market
Soros's theory suggests that price fluctuations influence investor behavior, creating a continuous feedback loop that drives prices to move more strongly.
With small-cap assets like Ethereum ($ETH ) and Solana (SOL), high speculation makes them more sensitive to reflexivity cycles compared to Bitcoin.
Recent example: When inflation data decreased, Bitcoin rose by 3.8%, while Ethereum and $SOL increased by 7.1% and 10.7% respectively.
SOLUSDTPerp94.99+0.95%
Why are altcoins more volatile?
Response to liquidity:
When there are expectations of interest rate cuts from the Fed, investors tend to accept higher risks, pouring money into altcoins to seek greater profits.Liquidation mechanism:
When prices fall sharply, leveraged positions get liquidated, causing greater selling pressure.
Example: The price of $BTC dropped from $108,000 to $92,000 at the end of December, triggering $1.4 billion in liquidations.
Fragmented market:
Crypto exchanges operate independently and lack uniformity, increasing the risk of more significant price fluctuations.
Why is Bitcoin less sensitive?
Higher stability: Bitcoin is likened to “digital gold” with broad acceptance from institutions.
Greater liquidity: Bitcoin has a large market cap, which helps reduce the impact from reflexivity cycles.
BTCUSDTPerp80,877.9-0.17%
Conclusion
Altcoins are highly volatile due to a combination of reflexivity, liquidation mechanisms, and the fragmented structure of the market. Understanding these factors helps investors develop more suitable strategies when participating in the crypto market.
Note: The crypto market is highly volatile and carries high risks. Please consider carefully before investing. #anhbacong