There are many dynamics of the cryptocurrency space that you need to understand if you’re to be a top trader. Sometimes, cornering the market really requires knowledge of how coins move and how you can anticipate their moves.
In the traditional stock market, there are several stocks that tend to move together. For instance, a company in the social media space could see a big boost because another company in the area has some big news. Or, if a government policy favors an entire industry, there’s a significant chance that the companies in that industry will see big stock jumps.
The same thing happens in crypto. We all know how fundamentals and technicals affect cryptocurrencies and their prices. However, there can also be situations where a jump - or otherwise - in the price of one coin leads to a similar move in the price of another.
Below, we’ll look into the phenomenon of one asset’s price affecting another and consider the correlations between some of the most popular assets and others.
Being the most popular and valuable cryptocurrency, Bitcoin remains the top draw for investors everywhere. The asset holds a great deal of sway, and it is also the most volatile.
Generally, the entire market follows Bitcoin’s price trajectory. When it experiences a huge drop, you can bet that other assets will do the same. When it’s on a rally, other coins will be as well. However, Bitcoin’s effect is especially felt by the top coins. Names like Ether, Binance Coin, and more are the first to feel the impact of Bitcoin's price trajectory because they are also major altcoins.
There’s a reason why major altcoins feel the impacts of rallies and the minor ones don’t. It’s because they are more linked to Bitcoin than anything else.
Ether is the second most valuable cryptocurrency and another top option for anyone looking to optimize their trading strategy beyond just Bitcoin.
Over the years, Ether has grown especially famous for the use of the Ethereum blockchain. More people are using the blockchain than ever, which means Ether’s price has been seeing impressive jumps lately.
Mostly, Ether moves in tandem with several other blockchain-based coins. This means that assets like Polkadot, Solana, and more have a higher likelihood of moving in line with Ether.
The phenomenon is especially true with the advent of areas like decentralized finance (DeFi) and non-fungible tokens (NFTs). Developers in these areas are looking for other blockchains to use, and that means that other blockchain-based tokens have a chance to shine. The majority of these developers will still use Ethereum, but other blockchains have a lot of sway as well.
Ether also shares a link with Ethereum Classic - the currency that forked out of it a few years ago. Ethereum CLassic used to move in tandem with Ether, but it doesn’t quite do so anymore. Of course, that’s not much of a problem as it means Ethereum Classic is now more autonomous.
Lastly, there is the multitude of coins that are based on the Ethereum standard. ERC-20 tokens have become especially popular, and they will also tend to move in line with ETH.
Binance Coin (BNB)
The third most valuable cryptocurrency in the world -- Binance Coin -- has come a long way. The asset is especially famous for being affiliated with Binance, the world’s biggest cryptocurrency exchange. But, it has also grown to become a valuable asset on its own.
When Binance Coin moves, it’s difficult to say the other assets that will move. However, the asset definitely has a significant pull on BEP-20 tokens. BEP-20 is the primary standard for tokens built on the Binance Smart Chain, and it works pretty much the same way ERC-20 works for the Ethereum blockchain.
Dogecoin is the most popular meme currency. The asset's price trajectory has proven to be independent of other assets and their movements - including Bitcoin. Of course, when there’s a downturn, Dogecoin will fall in line.
As the top meme currency, Dogecoin tends to influence other meme currencies. This means that assets like Shiba Inu and MonaCoin that are seen as not especially having a focused use case will follow DOGE when its price moves.