Does Bitcoin impact altcoins in any way? – Let’s talk about Bitcoin's dominance in the sector
Bitcoin has dominated the world of digital currencies for years and has become the one cryptocurrency that revolutionized digital finance. But it’s essential to note that its impact goes beyond its high price; this asset affects its entire market.
There is a complex relationship between Bitcoin and altcoins because it impacts the market dynamics. If you intend to join the sector, it’s best to look at the factors that trigger this interdependence and explore the different facets that establish the correlation between the largest digital currency by market cap and all the other assets in the sector.
When predicting the bitcoin price for the following months, you cannot overstate the impact that the market leader has on the altcoin niche, particularly in the context of btc prediction. In the following paragraphs, we will dissect the ripple effect it causes in the sector and try to figure out how trends influence prices.
What you should know about bitcoin dominance
You might have often heard that Bitcoin dominates the market, but you might not fully grasp what it implies. Bitcoin dominance refers to the percentage of the market cap Bitcoin holds. Even if it sounds complicated, it’s easy to calculate it: you divide the market cap of Bitcoin by the overall market cap of all digital currencies. Ethereum dominates the crypto market alongside Bitcoin, but Bitcoin has the largest market capitalization, showing how widely accepted it is and its status as a store of value. Investors prefer it over other digital currencies because they are more reliable and stable. Ethereum is another worthy solution due to its innovative smart contract functionality. Bitcoin and Ethereum address a diverse group of investors in industries that vary from retail to tech. The wide group of investors willing to use it contributes to their growth and stability. However, Bitcoin, as the first cryptocurrency, sets the standard in the crypto environment, and all the other currencies follow it.
Let’s explain how Bitcoin has a huge influence on other digital currencies
Bitcoin impacts the process of developing altcoins
Considering that it’s the first currency ever created with the help of blockchain technology, Bitcoin has influenced the creation of other digital currencies in several ways. Altcoins are basically alternatives to Bitcoin meant to make up for the lack of features, so many are clones of the first currency with extra features and upgrades. While Ethereum is the second largest cryptocurrency by market cap, it’s not the first altcoin developed. Litecoin was the first alternative cryptocurrency that was created with the help of a copy of Bitcoin’s code. Its developers wanted to provide users with a solution that works faster than Bitcoin and offers more features. Litecoin started a trend, and several other alternative cryptocurrencies like Bitcoin Cash, Bitcoin Gold, and Bitcoin Diamond were launched following it.
Bitcoin has opened the road for discussing cryptocurrencies and generated the digital currency revolution. Altcoins’ purpose is to become better than Bitcoin and surpass it in market capitalization, therefore they will follow its trajectory. Besides influencing crypto prices, it also extensively affects the development of crypto app projects.
Bitcoin impacts crypto prices
The market has turned bullish over the last couple of months, and if you have a short look at how assets performed, it’s easy to conclude what role Bitcoin had in the cryptocurrencies’ evolution. It’s also easy to notice that the first cryptocurrency has overrun the other assets since the start of the year and has the largest market share. In the spring, before it completed its fourth halving, it recorded a new all-time high and made investors feel optimistic again about it gaining more value in the long run.
Crypto specialists agree that all crypto prices follow the same pattern, and when Bitcoin’s price fell during the bear market, all the other assets followed it. However, once the market bounced back, cryptocurrencies emerged as more robust than ever. It’s true that not all projects survived the crypto winter, but investors believe that this period was essential to wipe out of the market the cryptocurrencies that lacked utility.
However, it’s essential to note that Bitcoin maintained its price more firmly than other digital currencies in the sector, even if their value followed the same trend. Bitcoin has proven more resilient and stable, transforming it into a digital currency with high integrity among investors.
Bitcoin sets the trends in the crypto market
Bitcoin is often used as a synonym for the crypto sector because it’s the most well-known and valuable digital currency. The fact that it controls half of the overall crypto market has only solidified its authority and boosted its popularity over the other assets. Crypto experts believe that Bitcoin positioned itself as the reserve currency in the sector and has a reputation similar to that of the US dollar in the global financial markets.
Bitcoin’s role and value affect all the other cryptocurrencies because its rapid price development makes the other assets look less competitive. If it were to compare their prices, it’s easily noticeable that they are inferior, especially the new projects. Therefore, it’s a trend among crypto holders to trade their other cryptocurrencies for Bitcoin, which could cause disruptions in the market because it impacts the demand for Bitcoin and depreciates the value of the other digital assets.
Also, considering that Bitcoin is viewed as the market’s reserve asset, a drop in its price could wipe out smaller currencies of the market. Its evolution threatens cryptocurrencies in several ways.
Bitcoin triggers network and tech developments
Bitcoin is the leader of the crypto market. Hence, any advancement in its network or the integration of scalability solutions could only set a precedent for other digital currencies. Bitcoin is a driver for innovation in the sector and the adoption of cryptocurrencies across global financial markets. Mainstream adoption of Bitcoin indirectly benefits altcoins because they are also viewed as possible additions to investment portfolios. According to their utility, they could gain increased popularity in the sector and spill over the traditional financial systems.
But do altcoins have the same effect on Bitcoin? The short answer is not often because the trend has always worked in the other direction.
