Why Are Altcoins Dependent On Bitcoin?

Why are Altcoins dependent on Bitcoin?Cryptocurrencies have stood the test of time to gain the trust of investors over the past decade. The journey that started with one master player in the field quickly turned into a hot competition over the years. Currently, we have over 3,000 alternate cryptocurrencies (commonly known as altcoins) available besides Bitcoin.

These altcoins can be traded against Bitcoin and FIAT currency such as USD or GBP in crypto exchanges. These are digital exchanges, available online, that allow users to buy / sell different cryptocurrencies. What’s more interesting is that these exchanges have brought in many tech advances, such as automated trading via AI algorithms as crypto genisus offer, and also manual trading.

The prime reason for preferring the crypto sphere as a transactional medium by most investors is its volatility. Even a simple readjustment of any of its affecting parameters causes a huge frameshift in the entire market. While the presence of altcoins provides flexibility and unpredictable potentials for the investors, it has been a common observation that their market trends are subject to those of Bitcoin.

Why? Let’s find out!

Simulated code

Even though we have a wide variety of choices for the altcoins, most of them are based on the same blockchain technology code as BTC, with a few modifications. This proliferation of the code similitude over the years undeniably provided recourse for the investors, but is, to this day, unpopular mainly due to its association with increasing unreliability.

For instance, Litecoin has the same code as Bitcoin but offers a rapid and flexible transaction system. Similarly, Bitcoin Gold, Diamond, Cash, and Ethereum (the popular cryptocurrency after Bitcoin). However, Bitcoin still acts as the underlying principle for all these technologies.

Bitcoin’s secured network

Over the years, blockchain technology has evolved its level of network decentralization, which has ensured a flawless security system for Bitcoin payments. This is majorly attributed to the volume of miners (over 18 million) over the platform that works on the mechanism as “proof”.

The reserve currency concept

Conventionally, investors considered USD as a reserve currency in the foreign exchange market. Bitcoin works on the parallel concept for most of the investors in the cryptocurrency markets, owing to the fact that it has been the front runner since the advent of blockchain technology. In particular, the new investors in the crypto sphere consider BTC to be the safest option for investment, thereby considering to trade the same for the altcoins, securing their funds, and ensuring subsequent profits.

All in all, this intriguingly explains the fact that Bitcoin’s market sentiment directly affects the plummeting market prices of the altcoins.

Why are Altcoins dependent on Bitcoin?Bitcoin’s pioneering existence

Undeniably, Bitcoin has been the pioneering leader in the cryptocurrency market since the inception of the concept. So, it is undoubtedly the prime choice for an investor. While they look for affordable altcoins, Bitcoin serves as a universal standard when it comes to pricing.

Due to an extremely competitive market, one can only speculate the capability of these altcoins to reach their maximum potential and substitute Bitcoin in any way. Even while, Ethereum, Ripple, Monero, Cardano, and the likes seem promising alternatives, none of them independently match the heights that Bitcoin has reached so far.

Conversion standard

While swapping your altcoins at most crypto exchanges for a profitable trade, it is necessary to convert it into Bitcoin before getting it to your fiat currency. However, at some other exchanges, conversion is only allowed from one model to another, keeping Bitcoin as the base of the system. This seriously impacts the independence of altcoins in the market.

Conclusion

The increasing dependence of altcoins on Bitcoin for their value clearly indicates that it has been the leader to put all the other cryptocurrencies into the mainstream, paving the way to the current value of the blockchain market to the multibillion user base today. Hence, when it comes to market sentiments, Bitcoin is the guiding factor.

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