I don't know if how many will agree when I say that the cryptocurrency world is represented by Bitcoin. It is the first cryptocurrency that people who joined the crypto market learned about. It is also the cryptocurrency that most people who are not into crypto will mention when you ask them about crypto.
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Disclaimer: This is not financial advice, and I am not a cryptocurrency expert. All the opinions expressed here are based on my own research and observations regarding how many individuals perceive the crypto world, particularly those who are not yet involved in cryptocurrencies.
Many use Bitcoin as a reference point when it comes to market trends, ups, and downs. But is it fair to assume that every cryptocurrency will lose its value when Bitcoin drops? I don't think so.
What I'm trying to say is, isn't it time we stop making Bitcoin the face of Crypto? Every crypto is unique, has its own value, and serves a purpose. So why does the media always represent it as Bitcoin? For me, the Crypto world is not just Bitcoin.
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Why can Bitcoin affect the crypto market?
When Bitcoin falls, other cryptocurrencies often experience declines as well due to several reasons:
Market Sentiments that Affect Investor's Behavior
Bitcoin is considered the leading cryptocurrency and acts as a market barometer. When Bitcoin's price declines, it creates a negative sentiment and fear among investors. This leads them to sell not only Bitcoin but also other cryptocurrencies, causing their prices to fall.
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Trading Pairs
Many different cryptocurrencies are bought and sold using Bitcoin on trading platforms. So, when the value of Bitcoin goes down, it affects the trading of these other cryptocurrencies. As a result, the value of those other cryptocurrencies also goes down compared to Bitcoin.
Market Cap and Liquidity
Bitcoin is like the big brother of cryptocurrencies. It has a lot more money invested in it and is easier to buy and sell compared to other cryptocurrencies. When the whole cryptocurrency market is not doing well and prices are falling, people usually feel safer
putting their money into Bitcoin because it's seen as more stable and easy to trade. This means that other cryptocurrencies might not be in as much demand or wanted by investors during those times.
Many cryptocurrencies, particularly those that emerged earlier, have historically relied on Bitcoin for price discovery and overall market sentiment.
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It is true that many cryptocurrencies follow Bitcoin's movement, but that doesn't apply to all currencies in the crypto world. I believe that every cryptocurrency should be independent and should not be affected by Bitcoin, and I have seen evidence of this.
For example, during a Bitcoin drop, Axie Infinity and its associated token, SLP, continued to rise unaffectedly. Similar observations have been made in other popular blockchain games, where their tokens maintained value even as the market dropped.
My assumption is that people who are holding those coins use them in their games and have trust in the utility and value of those coins. So, despite Bitcoin dropping, those holders don't care because they believe in that currency at that time.
This is proof that a cryptocurrency can perform well even when Bitcoin's price is dropping. I believe that the main reason other cryptocurrencies get affected is due to market sentiment. Because the crypto world is represented by Bitcoin, if people see Bitcoin falling, they may assume that other coins will also fall and withdraw their holdings in other cryptocurrencies.
I am not disrespecting the legacy of Bitcoin, but if we want the cryptocurrency market to succeed, I think we should stop representing the crypto world using Bitcoin.
How to Make the Crypto Market Independent from Bitcoin?
To make other cryptocurrencies independent from Bitcoin, here are some possible steps:
Increased adoption and awareness
Encourage wider adoption and recognition of other cryptocurrencies based on their unique value propositions and use cases. Building strong communities, partnerships, and real-world applications can establish their own market dynamics, reducing reliance on Bitcoin's sentiment.
Diversification of trading pairs
Encourage the option to trade cryptocurrencies with different things, not just Bitcoin. This means you can trade cryptocurrencies with stablecoins (which are cryptocurrencies designed to have a stable value), regular money like dollars or euros, or even with other cryptocurrencies. Having more options for trading gives different ways to determine the value of cryptocurrencies.
Enhanced liquidity
Improve the liquidity of individual cryptocurrencies to reduce dependency on Bitcoin's fluctuations. Being listed on major exchanges can significantly help improve the liquidity of a cryptocurrency. Major exchanges typically have a larger user base and more trading activity compared to smaller or less well-known exchanges.
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Market maturation and regulation
We can make the cryptocurrency market more mature by creating rules and getting big companies involved. This helps make the market more stable and reduces risky trading. When we have clear rules, it makes the market safer and easier to understand. It also helps prevent people from buying and selling cryptocurrencies too quickly just to make quick money. With these rules and big companies participating, the cryptocurrency market becomes a safer and more predictable place for everyone involved.
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Focus on fundamentals and utility
Highlighting the basic worth and usefulness of each cryptocurrency can help them hold onto their value even when the market is going through rough times. Cryptocurrencies that actually solve problems in the real world, meet the needs of the market and show solid progress in their development are more likely to handle market downturns well and attract investors who want to invest for the long term.
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I know it is easier said than done, but if we strive to promote other cryptocurrencies that have real, practical uses, we might succeed in changing how people outside of the crypto community perceive the crypto world.
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Hi there, my name is Dennis and I'm from the Philippines. In my free time, you'll usually find me tending to my garden, sketching out new drawings, or writing about life, love, relationships, struggles, and faith.
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