The emergence of Bitcoin in 2009 allowed the expansion of the world of cryptocurrencies, which has undergone a remarkable transformation, going from a simple idea to a financial revolution. Since then, the industry has evolved, and today, Bitcoin represents only one facet of the world of cryptocurrencies. Over the first decade of their existence, the number of these digital assets has grown exponentially.
However, while these altcoins offer diverse use cases, from governance to powering data oracles, they share an intriguing common trait: their price seems inextricably linked to that of Bitcoin.
Bitcoin is the godfather of the crypto industry and the original cryptocurrency.
While it is true that the concept of cryptocurrencies existed well before the invention of Bitcoin, it was only with the latter that they could truly appear in the public eye. Bitcoin was the first cryptocurrency to explode on the financial scene. Indeed, in 2009, when Bitcoin was created, it was practically the only cryptocurrency.
Its emergence generated considerable interest and paved the way for creating other digital assets. At that time, the cryptocurrency industry was in its infancy, and Bitcoin was its spearhead.
Bitcoin quickly captured the attention of investors, media, and the general public as a pioneer cryptocurrency.
Its meteoric rise has generated unprecedented enthusiasm for digital assets and prompted many innovators to develop alternative cryptocurrencies, hence the term altcoins. Thus, Bitcoin has played a central role in creating this dynamic and rapidly expanding industry.
Bitcoin remains the benchmark crypto.
The initial popularity of Bitcoin as the first cryptocurrency naturally led many investors to enter the crypto world by purchasing Bitcoin. This helped solidify Bitcoin's market dominance and make it the primary benchmark for digital asset value.
Other cryptocurrencies, altcoins, are often the subject of comparisons to Bitcoin, measuring their success and performance against this first iconic cryptocurrency.
So, while many altcoins have since emerged with unique technologies and use cases, they are frequently judged based on their relationship to Bitcoin.
Investors, traders, and market observers continue to closely monitor Bitcoin, and its price movements generally serve as a barometer for the entire crypto industry.
It is, therefore, not surprising that Bitcoin is today a determining factor in the price dynamics of altcoins, thus strengthening its influence on the crypto ecosystem as a whole.
Bitcoin Market Cap Dominates Entire Crypto Market
The other fundamental reason altcoins are closely linked to Bitcoin's price movements is the measurement of their values. Indeed, altcoin prices often have a value in Bitcoins, a direct consequence of the predominant position of this first cryptocurrency on the market.
Despite the emergence of several thousand competitors, Bitcoin continues to dominate the market, owning more than half of the total crypto market capitalization. This unquestionable dominance gives Bitcoin a considerable level of influence and control.
Additionally, most altcoins cannot be directly acquired with fiat currencies. In practice, most investors first acquire Bitcoins, which they then exchange for the altcoin of their choice.
Therefore, if an individual holding altcoins decides to leave the cryptocurrency industry completely, it is very likely that they will first sell their altcoins for Bitcoins and then convert those Bitcoins to fiat currency.
Also, altcoin prices are frequently assessed against the price of Bitcoin, so Bitcoin's movements significantly impact altcoins. If Bitcoin experiences a decline in value, it is common to see the prices of altcoins follow the same downward trend and vice versa.
However, while this general rule is common, it is not invariable, and there are situations where altcoins can diverge from Bitcoin. Nonetheless, Bitcoin is a crucial reserve currency on the largest cryptocurrency exchanges.
