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A few people asking in social channels again, so I'm going to address some of the math underlying the influence Bitcoin has on the rest of the market.
Let's pretend for a moment, that there was zero fiat onramp to trade crypto. Then, let's pretend that the only stablecoin was USDT Tether.
Now, let's pretend that there are zero crypto trading pairs except against USDT.
Are you with me so far?
Bitcoin would still be the dominant coin, trading BTC/USDT. It would likely hover between 40-80% dominance. It has been around the longest, but it is not just a legacy product still desired. It has a limited cap that causes value sentiment, and will do so until it actually presses against supply, which has NEVER happened despite what people have said. It will happen, but will require billions more $ in HODLing to reach that point.
Sentiment is not the only thing piling on Bitcoin. If there is fear in the market, everyone who sells, sells across the board. They sell ETH, LTC, XRP and also Bitcoin, so the percentages across top alts always stay within close parameter except SEC VS. Ripple, where XRP sold hard and everyone bought the dip if they were sane.
Smaller coins get pump and dump FUD FOMO, and those left holding the bag(s) literally, continue to hold even through following Bear scares, because they are entirely rekt if they sell. This causes every single coin under a certain threshold to lose volume, and lose momentum against larger coins.
So now, let's say a big market event happens; global news fear mongering, green worries, government bans. People fear sell Bitcoin and it finds buy-in response at new support levels wave after wave. This does not affect value for USDT at all, because it's one feature is to remain at a fixed price. For the most part, every coin will follow similar moves to top coins because of fear... people watch to see what happens, but also bots get signals from the same market information. This would cause similar affects at market for most coins except for those that were recently dumped hard, which is essentially every single token below top 30 or so. From a market perspective, unless it is ADA or coins revered for a specific team-value or proven utility, coins pump and dump in fast spurts that shake people loose and cause long term HODL bags.
Now, enter Bitcoin trading pairs. It is almost non-existent for a coin to trade against USDT only. BTC trading pairs account for a massive amount of volume at market. Technically, the only times that smaller coins have a chance to go up in value, outside of organized pumps, is when Bitcoin is dropping in volume, and then starts to sell downwards. At that moment in time, if there is strong sentiment for a coin, meaning a lot of people are watching it and want to see it go up in value, there is shill news that it is a good time to buy that coin, then it only takes a small amount of buy pressure for that coin to rise in value against Bitcoin, again when Bitcoin is dropping in price and is low on volume.
Even if Bitcoin is dropping in price, if it is selling off hard, lots of volume, this will outweigh every small coin that does not have strong buying sentiment. It will go down with Bitcoin mathematically, because they both trade against the dollar, and the dollar remains at "1".
If Bitcoin is going up in value during times of low volume, it is possible to pump a coin, but it will get less upward momentum because the values are pushing against Bitcoin's volume, but gaining ground against the dollar which, once again, remains at 1. For the most part, small coins do ride a mathematical wave with Bitcoin, but every time Bitcoin moves with heavy volume, unless people are working a small coin in large numbers, Bitcoin will push the value of the coins down.
Late 2018, most coins lost 90% value. It happened again in 2019. It is happening again now despite people's belief we went from a bull to a bear. Truth is, money got over-extended in the identical p&d's that others warned about, and new "experts" were too stupid to research. This is how stuff gets banned, by the way.
Why does this happen? Yes, there are pumps. Yes, there are pockets of time where people jump on certain coins that move temporarily without sentiment from Bitcoin. But, overwhelmingly, every exchange has Bitcoin, and very few carry the same bundle of others. Trading volume provides liquidity. The more volume and liquidity in a high ranking coin, the harder it is to move the price, so when Bitcoin moves big in a short time, it will bring other coins down with it in price, even if there is little to no selling action. The value is directly tied to its Bitcoin pair whether that is how you bought it or not. Remember, Bitcoin is the only coin that does not trade against Bitcoin! It will always have this advantage.
We went through the phase of "flippening" and it never happened. ETH is the only coin with the sentiment and market share to do this, and it is at 1/10th the value needed to do so. We went through the "decoupling" phase, where, if all coins stopped trading against BTC and only against USDT, they could overtake Bitcoin. This would still fail unless all exchanges listed all of these other coins, and there was more money at market to do so, which is likely impossible mainly because retail is needed, and retail is stuck in crap positions that will HODL for eternity in poopcoins.
So, BTC trading pairs are going to continue. 4 main factors to take away:
If Bitcoin goes up with high volume, it will send your small alt down.
If Bitcoin goes down with high volume, it will take yours down with it.
If Bitcoin goes up with low volume, enough followers of your coin can put a little market buy action in it and it will go up, but not as much as you wish.
If Bitcoin goes down with low volume, now your altcoin has a chance to go up in value with very little market buy activity.
On a similar note, partly related, is the overall Bitcoin dominance. If Bitcoin was only 20% of the market volume trading, then the same relationship would occur, but it would have a much lower impact on price and how hard it is to pump small coins.
Some may wonder, if these things are true, why more 'experts' don't know this, and my answer is they very well should, but I'm not aware of anyone else having ever taught this, but I've been saying this since 2018.
Some may also wonder why pump/dumps work if this is true? The answer is that coins are typically chosen for extremely low market value and low volume, sitting stagnant for some time. Low value and volume almost guarantee that in the matter of seconds, it is easy to force a price up by 100-500% with very little money. Even if Bitcoin did happen to move in that time, the sheer velocity of sudden market price buys huddled together causes a mountain of price action very easily, very quickly. It has to be an organized effort, and the underlying math does nothing to help the cause. The reason it works is because it is a coordinated, well planned event.
If you are trading and getting rekt, but insist on continuing to trade small alts, the best thing you can do for yourself is load up a big screen with BTC/USDT and watch it in comparison to your ALT/USDT and ALT/BTC pairs. You will see exactly what I am talking about.
I hope this helps and for now, crypto Gordon Freeman... out.
