Why do other currencies follow suit when Bitcoin rises and falls?

7彩神仙鱼 · 2023-06-29T03:22:27.000Z

Why does Bitcoin rise and other currencies follow suit? When BTC falls, the entire currency circle also falls. 1. The impact of BTC trading As we all know, both mainstream exchanges and small exchanges currently have BTC/other currency trading exchanges, and the frequency of investors using BTC trading exchanges is second only to USDT trading exchanges. In this case, when the price of Bitcoin's legal currency falls, the impact will naturally be transmitted to other currencies through transactions, causing the prices of other currencies' legal currencies to fall. Some friends may not understand this. For example: If the price of BTC legal currency is US$10,000 and the price of ETH legal currency is US$1,000, then the transaction price ratio of BTC/ETH at that time is 1:0.1. If Bitcoin falls and falls to $9,000, and the BTC/ETH trading ratio remains unchanged at 1:0.1, the legal currency price of Ethereum will change from $1,000 to $900. This resulted in a situation where Bitcoin fell and Ethereum followed suit.

Why do other currencies follow suit when Bitcoin rises? When BTC falls, the entire cryptocurrency market also falls.
1. Impact of BTC trading
As we all know, both mainstream exchanges and small exchanges have BTC/other currencies trading pairs, and the frequency of investors using BTC trading pairs is second only to USDT trading pairs. In this case, when the price of Bitcoin legal currency falls, the impact will naturally be transmitted to other currencies through trading pairs, causing the price of other currencies to fall.
Some of you may not understand this. For example, if the BTC fiat price is $10,000 and the ETH fiat price is $1,000, then the BTC/ETH trading ratio is 1:0.1. If Bitcoin falls to $9,000, and the BTC/ETH trading ratio remains unchanged at 1:0.1, the Ethereum fiat price will change from $1,000 to $900. This will cause Bitcoin to fall and Ethereum to follow suit.
2. Anchoring Effect
At present, the main players and quantitative teams of most currencies (other than Bitcoin) will anchor Bitcoin and determine their own strategies based on the rise and fall of Bitcoin. In other words, the main players will monitor the price of Bitcoin. When the price of Bitcoin falls, they will choose to sell other currencies they hold. When the price of Bitcoin rises, they may choose to take the opportunity to buy, pull the price, etc. In other words, the main players of other currencies will refer to the trend of Bitcoin to a large extent in their trading strategies.
3. Bitcoin’s influence
In fact, the two points mentioned above can be summarized as "Bitcoin market influence". Because of Bitcoin's influence, every exchange has BTC trading, and because of Bitcoin's influence, anchoring has appeared. The influence covers a wide range, including: Bitcoin's special significance, consensus, popularity, market value share in the entire digital currency market, etc. These factors combined have made Bitcoin a price trend vane in the currency circle.
Having said that, the rise and fall of Bitcoin does not absolutely determine the direction of the entire cryptocurrency market. It is only true in most cases. For example, when Bitcoin falls, a certain currency suddenly has a major positive news, and this currency may not follow the rise. Or when the market environment is bad and the funds in the market are insufficient, Bitcoin rises sharply and has a blood-sucking effect, so that other currencies do not have capital inflows, resulting in Bitcoin rising alone and other currencies being ignored. The specific situation needs to be judged specifically, but in general, it is correct that Bitcoin influences the overall trend of the digital currency market.