CoinMarketCap recorded Bitcoin surging 11% on Friday to post nearly $17,000, its highest price since mid-December before sliding downwards to below $15,000 today. The trend marks a pause following weeks of bearish performance from Bitcoin even though it fell short of bringing complete recovery after dipping from $20,000 to $12,000 in December 2017. This was paralleled by Ethereum reaching an all-time high of over $1,200, and still holding at over $1,100 today. As many ICO tokens are built on the ERC-20 platform, we would expect this to have a direct correlation with Ethereum’s growth as a store of value. Litecoin also rose to nearly $300, after a steady decline since December 19th. As for most alt-coins, they tanked this weekend after major sell-offs occurred.
Analysts and causal traders on social media who hoped that Bitcoin will continue to reverse were quick to note the action of altcoins in response to Bitcoin’s price surge. It’s not lost to most observers that no matter what happens, major altcoins react to Bitcoin’s price even when it’s not logical. One might expect that people are cashing out by turning in their alt-coin for Bitcoin, and then turning that into fiat currency. As the whales cash out, prices drop and in a panic, everyone else sells off their assets, thinking that the bubble finally hit, driving prices down even further. My thoughts? Don’t Panic!
Most alt-coins are already on their way back to recovery after this weekend. Those who bought low when everything tanked are already seeing nice gains as many coins are climbing back into their previous price ranges.
Optimism for alt-coins remains high among well-known figures despite the increased investor interest in leading currencies like Bitcoin. Roger Ver, one of the original investors in Bitcoin core has shifted much of his digital wealth into Bitcoin Cash, Ethereum and other alt-coins.
To get the picture of why altcoins appear to react to Bitcoin, note that major exchanges offer Bitcoin trading pairs so that investors trade BTC for altcoins and not BTC for USD or other fiat currencies. Since Bitcoin is the leading coin to be traded for altcoins, its volume, market cap, and popularity stay the center of the crypto world and every time its price increases seems the altcoins’ value has descended.
The result is that Bitcoin will for a myriad of reasons seem to lift, suppress or depress the altcoins. Consider that most people have set their stops on Bitcoin and most bots trade in BTC and you will understand why any big change in the price of Bitcoin creates a cascade effect. However, every time this has happened to date, alt-coins have recovered quickly and came back stronger than ever.
Following news of Bitcoin’s price looking up again, investors could panic and rush towards BTC at the expense of alt-coins wanting to profit from its recent surge. By tracking other coin prices based on Bitcoin’s price alone don’t give the correct picture of each alt-coin’s value.
The true value of an alt-coin will depend on whether people are investing for the long term, as well as the utility of the coin, and the underlying business associated with it. It’s difficult to predict what will happen in the short-term but thinking about the long-term, several alt-coins have shown the potential of breaking out and taking the lead.
Bitcoin core is still the digital reserve currency, but it may not hold the throne forever. For example, people are already trading against Ethereum and Litecoin on Binance. The moral of the story: diversify your interests, and if you see your alt-coins tank, then check prices on Bitcoin and other leading currencies before making a hasty decision.