If you didn’t already know, altcoins follow bitcoin, almost all the time. But why is this happening? Is the crypto market completely rigged?
Only by knowing this, you can become a better trader, and yes, believe me, it is predictable!
I will give you one quick answer and a more in-depth explanation. I will also share a tip on how you can predict the next move of your favorite altcoins.
Altcoins follow bitcoin because the immature crypto market is in an early stage of trading development and bitcoin is the leading cryptocurrency. Many altcoins have not traded long enough to have their own trading behavior and follow BTC instead. Crypto traders are mostly driven by emotions, not facts. When bitcoin takes off, so do most altcoins based on emotional decisions. As time passes, more altcoins will stop following bitcoin to have a trading pattern of their own.
Why altcoins follow big numbers
This image is a screenshot of the crypto market during a large breakout that started on the 11th of April.
As you can see to the right in the picture, most of the top altcoins are tagged along.
Most of the altcoins had even greater gains than bitcoin.
The bigger the move the more likely it is that altcoins will follow bitcoin. Don’t underestimate the power of word of mouth and the spreading of news around the crypto community.
Traders are faster than ever thanks to technology and get notified instantly on their social media, mobile phones, and from other news sources.
What usually happens after BTC makes a large move is that news sites and other crypto forums are flooded with the latest information.
When this happens, be prepared because these moves can last for many weeks, even months and if you join the move early you stand to make small fortunes.
Some altcoins even surpass bitcoin as you saw in this example, which is why altcoin trading can be so profitable.
This is awesome, but very strange if you look at why thousands of altcoins follow one single coin.
Think of the crypto market as a family where bitcoin is the mom and the altcoins are the kids.
Dad is not in this example because no one listens to him anyway.
When mom and the kids are out shopping, everyone follows mom, those are the rules. The kids do not know where they are going so mom has to lead the way.
Life is this way in the early days because children are too immature to make their own decisions.
The same goes for the crypto market!
Altcoins follow bitcoin because they have not learned to trade their own way yet. They don’t have enough liquidity or trust yet to trade on a large scale and the company behind the coin is probably in a startup phase as well.
Something that really opened my eyes was the fact that the crypto market is basically only traded by private investors and traders around the globe.
Of course, there is institutional money involved, but not nearly in the same way as other financial markets.
We never see a daily 25% gain or a 35% drop in big traditional traded companies.
This is because cryptocurrencies are traded by people with no trading knowledge or experience.
This is a topic that confused me in my early days of trading. What are the professional traders and investors doing that is so much better than my trading.
Why am I getting so upset about losses and so excited about profits?
You are not alone if you feel this way.
Pay attention now, this next part will help you understand and trade your altcoins better.
There are thousands of altcoin traders out there with the same reaction to both profit and loss.
New traders simply can’t handle these emotions, so they act. And what do they do?
When they see large gains, they want a piece of this good feeling of making money so they buy. When they own cryptocurrencies and they experience a large loss, they want to remove this horrible feeling as fast as humanly possible and they sell.
The thing you need to understand is that traders react in the same way, but not exactly at the same time.
How this helps you understand why cryptocurrencies follow BTC is easy.
Traders does not receive the news at the same time.
This is a massive trading edge for you.
If you catch these large moves early, you can be sure to know that the news will spread, and keep spreading for at least 24 hours.
Here is where you can make your move with high trading conviction and enter the market with the wind in your sail.
Good feeling right?
These emotions affect 99% of all crypto traders, but to you anymore. You are going to learn from this article and profit from this trading behavior.
When altcoins don’t follow bitcoin
Here is another example of the crypto market in action. Look to the right in the picture and you can see that bitcoin barely moved at all for the last seven days.
This is a completely different trading behavior.
What does this mean?
When BTC trades 15% higher in a strong breakout, you can be sure to see your portfolio of altcoins increase with monster gains as well.
The explosive moves of bitcoin trigger a response in the entire crypto market that suddenly becomes overly positive or negative.
This happens even though some of the coins barely moved for months!
This is obvious and we know by now that big moves have this effect.
But when altcoins don’t follow BTC, how is this explained?
Generally speaking, the more quiet the crypto market is the more room there is for altcoins to trade their own way. This happens because there is no consensus about direction due to a large move from bitcoin.
Altcoins now has an opportunity to move freely when attention is taken away from bitcoin. When this happens, we have real price discovery in the crypto market.
A term that comes from traditional finance.
Price discovery means that price is finding its true value based on all the fundamentals and technical trading charts.
At this time cryptocurrencies trade the same way as any stock, commodity, or forex pair.
This is incredibly reliable trading information you can start using immediately.
During this time the attention is redirected back to the company behind the coin and the technical chart of this specific coin.
Here is an opportunity where you can trade your favorite coin while it’s not following BTC.
Focus on your altcoins trading behavior during this time and you will be amazed how many new insights you will gain from only following your altcoins alone.
Maybe this is what you have been looking for, a simple trading behavior from a smaller cryptocurrency.
How to predict altcoins
This screenshot I a snapshot from March 2018 when bitcoin fell over 20% in just a few days.
As you already know, most altcoins followed bitcoin this time as well.
We know that almost all cryptocurrencies follow bitcoin, and this is a massive trading edge.
Imagine if all the publicly traded companies would follow one big company, let’s say Apple for example.
Hedge funds and the private investor would only have to focus their attention to learn how the Apple stock is moving and they could easily predict the other pool of stocks.
Good news, this is crypto and this is happening as you are reading this.
Though this doesn’t happen to the same extent in the traditional financial markets. It is almost as if someone is controlling all the action in the crypto market.
When to push prices higher and when to dump everything on top of us at the same time when we start buying. But how can you predict this behavior and profit from your favorite altcoins?
Let me clear something for you right now to get rid of any conspiratorial theories.
The crypto market is not rigged!
How do I know that?
It would be impossible for a single company or any institution to control all the trading in over 5300 altcoins.
These altcoins follow bitcoin because the participants trading these coins do not have enough knowledge about how markets work.
They trade these markets because of how much money their brother made, or because of how easy it was for their classmate to make money through their mobile phone.
These traders without experience will eventually fall victim to positive or negative emotions due to rapid losses or huge gains.
This is normal for any person who has no control over their actions. Even more when they stand to lose or make a lot of money in the short term.
After a large move, bitcoin usually makes large counter moves to upset everyone trading the markets.
What a mess, right?
Here are two simple but robust tips on how to predict when altcoins will follow bitcoin and when they will not:
- Learn how to predict bitcoins larger movements.
- When bitcoin is not moving, altcoins move on their own.
How this helps any trader is easy.
Learn the behavior of BTC and you will learn the behavior of altcoins, at least for the time of the larger moves. It is far easier to learn the trading behavior of one coin, instead of the roughly 5300 coins in circulation.
Let’s face it, you stand to make more money trading a larger move than a small choppy trading range.
So forget about trading ranges and start putting more effort into analyzing and learning the larger trends.
Remember, there is a greater chance altcoins will follow bitcoin during a massive bull run.
This is a real trading edge.
I will say that it’s not easy to predict any coin out there but if you start with BTC you have a huge advantage.
As soon as you start to see a pattern form before the bigger moves you can make yourself ready to trade your cryptocurrencies.
Trading algorithms and altcoins
Trading algorithms are trading the crypto market every day of the week, we just don’t see it. The larger altcoins are traded more heavily and frequently.
A basic understanding of trading algorithms is that they trade the market in a very short time horizon.
One strategy these algorithms use is to push the price further in the direction of the market.
They often rely upon the momentum of the market.
So guess what happens when bitcoin makes a large move?
Exactly. They fire on all cylinders and help the market push even further.
This is another simple but very effective trading edge you can use to gain more conviction.
This force stays underneath the surface of the market and helps push the market further in the same direction of the original break.
Use this information the next time you think of buying or selling a larger move.
This is key information on why altcoins follow bitcoin. You need to see this from the perspective of conviction. Every trader needs conviction to enter a trade but also to stay with a trade.
Earlier we said that there is a higher chance that altcoins will follow bitcoin when the move is large. The same goes for trading algorithms.
So for trading algorithms to profit they need to be sure of the direction.
And when is the highest probability of direction?
That’s right, during a momentum play.
How this helps any crypto trader is easy. When bitcoin starts moving, the algorithms start moving and you should too.
Trading altcoins will never be the same now. I know the feeling. You almost wish that bitcoin will make a jump today so you can join the fun, but this time, with more conviction than ever before.
I’ve laid out simple but robust tips that will make you see the crypto markets from a different angle. You have learned why cryptocurrencies follow bitcoin and how you can predict and profit from this phenomenon.
It is now easier than ever to click the buy or sell button with fresh facts that explain why things are happening.
The fact that why trading algorithms help push the big numbers is something you won’t forget the next time you wake up and see double-digit gains.
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Most altcoins follow Bitcoin during larger market moves.
Yes. The direction does not change this behavior.
No. The Crypto market is too big to be controlled.