Why do altcoins decrease when Bitcoin rises: Detailed analysis

The cryptocurrency market is always a volatile and unpredictable environment. An interesting phenomenon that many investors have noticed is that when the price of Bitcoin (BTC) rises, many altcoins decrease in value. Why is there such an inverse relationship? Let's analyze the main reasons behind this phenomenon.

1. The dominance of Bitcoin (Bitcoin Dominance) Bitcoin is often seen as a "safe haven" in the cryptocurrency market. When Bitcoin rises, advisors tend to shift capital from altcoins to Bitcoin because it is a more stable investment. This increases the value of Bitcoin in the market, leading to the depreciation of altcoins in the future.
2. Liquidity Flow (Liquidity flow) Most altcoins are traded with the BTC pair on the exchange. When the price of Bitcoin rises, the value of altcoins (measured in BTC) decreases. This prompts traders to sell altcoins to buy Bitcoin, taking advantage of its growth. The decline of these altcoins leads to a decrease in their value.
3. Market Psychology (Market Psychology) Bitcoin usually leads the trend of the cryptocurrency market. When Bitcoin rises sharply, this is often seen as a positive sign for the entire market. However, during this period, advisors tend to prioritize Bitcoin because it is less likely to occur than smaller or less well-known altcoins. This leads to a shortened capital flow from altcoins.
4. Earnings Allocation and Reallocation (Receiving profit and reallocation) When Bitcoin reaches a new peak, many investors, especially those who have profited from altcoins, will take profit and convert their assets to Bitcoin. They expect Bitcoin to continue to rise, creating selling pressure on altcoins, thereby reducing their prices.
5. Market Manipulation (Market Manipulation) The cryptocurrency market is no stranger to freedom. Large investors (often called 'whales') can use pump and dump strategies to control the price of altcoins. When Bitcoin rises, these individuals can sell altcoins to accumulate more Bitcoin, creating strong volatility in the altcoin market.
6. Fear of missing out (FOMO) When Bitcoin rises in price, the FOMO effect often causes investors to shift their funds or new money into Bitcoin. They are afraid of missing out on the opportunity to make money from this trend, which leads to a decrease in investment strength and value of altcoins.
7. Nonlinear Correlation (Lack of Correlation) Although altcoins are often seen as following Bitcoin, this is not the case right now. Certain events or news about Bitcoin can drive up its price without a corresponding positive impact on altcoins, leading to a divergence between the price of Bitcoin and altcoins.
8. Speculative investment (speculative investment) Altcoins are often more speculative than Bitcoin. When Bitcoin experiences a strong rally, market attention will shift to this leading currency, making altcoin projects more attractive to investors. Conclusion Determining the complex relationship between Bitcoin and altcoins is necessary to build a diversified investment strategy. Although altcoins have greater potential, they are often influenced by various fluctuations of Bitcoin. Always conduct thorough research, balance skills, and consider market context before making investment decisions. Advice: Diversify your investment portfolio, maintain a strong mindset, and monitor market trends to optimize profits. DYOR! #Write2Win #Write&Earn $BTC {spot}(BTCUSDT)