All cryptocurrencies on the market can be divided into three types - bitcoin (as the leading and most popular cryptocurrency), steybcocoins (as an analogue of the fiat dollar, we will consider them identical), alt-coins. These three categories of cryptocurrency are interconnected in trading pairs. Depending on the situation on the cryptocurrency market, trading pairs will go through different cycles.
Usually, new traders or investors enter the market in the BTC / USD trading pair. The US dollar, or stablecocks, are the most stable. The second level of stability is Bitcoin. Altcoins - the most unstable.
Dependence in the pair BTC / USD is very simple. The growth of bitcoin is always an increase in the value of bitcoin in dollars. The fall of Bitcoin is a decrease in its dollar equivalent.
Altcoin / dollar and altcoin / dollar trading pairs have a more complex mechanism. Therefore, we consider different situations in more detail.
BTC increased in price
Suppose that bitcoin has grown from 10 to 11 thousand dollars. Abstract altcoin has not changed its value, for example, its price is 10 dollars. What will happen in a pair of bitcoin / altcoin? With a cost of Bitcoin of 10 thousand dollars, one Altcoin cost 0.001 Bitcoin. When the price of bitcoin rose to 11 thousand dollars - the price of altcoin fell to 0.00091 bitcoin. It turns out that to buy Altcoin for Bitcoins, you will need 9% less Bitcoins, although you will need the same $ 10 in Fiat.
BTC lost in price
The price of bitcoin dropped from 10 thousand dollars to 9. Altcoin costs the same 10 bucks. By the same algorithm as for a growing bitcoin, it becomes clear that now 11% more bitcoins will be needed to buy one altcoin. The price of altcoin in the dollar is still the same.
Altcoin cost changes, bitcoin is stable
Bitcoin has a cost of 10 thousand dollars. Altcoin added 1 dollar in price and now it costs 11 dollars. In bitcoins, the price of altcoin was 0.001 BTC, after growth - 0.0011 BTC - we have an increase in the price of altcoin in bitcoins by 11%. By analogy, if the price of altcoin is reduced by $ 1 - up to $ 9 - its value in Bitcoin will be 10% lower.
BTC and altcoin change cost at the same time.
The question of making profits from altcoin trading will depend on which cryptocurrency will grow faster - altcoin or bitcoin (if we are talking about their simultaneous growth). If bitcoin grows from 10 to 11 thousand dollars, and altcoin from 10 to 12 dollars, the trader will receive 9% more. If, with the same growth of Bitcoin, Altcoin drops in price by $ 1 - up to $ 9 - then the trader will lose 18.1% of bitcoins. Depending on the rate of growth or fall of the BTC / dollar and altcoin / dollar trading pairs, the expected profit will also depend.
Why do you need it?
The growth of the cryptocurrency market will make good money on the Altcoins trade. The fall of the cryptocurrency market, on the contrary, will increase losses from the Altcoin trade. In the future, Alt-Coins will become less dependent on BTC and will have direct trading pairs, which will allow traders to more easily understand the market and lose less because of bitcoin drops.
