We definitely live in a world where timing and information are the two most crucial factors when making any investment decision. The fact that we are living in a world where digital currencies are no more a thing of the past only enhances the importance of these two factors.
Now, cryptocurrencies are with us for more than a decade yet, there still are people who are not familiar with their basic concept, how they work and what affects their value. That is a shame because the cryptocurrency market is the most profitable of all and with a vast number of investment opportunities.
Digital currencies and marketing
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There is a risk with any investment
Understandably, like with any other investment type, this one too comes with certain risks, but that’s only a reason more why you should do your homework before embarking on this crypto journey. Do this much necessary research as the more info you know, the less likely you will oversee some crucial fact, and more importantly, it will be much easier for you to make the right decision and gain the most profits.
Even though one first needs to learn the terminology, after doing so, there are plenty of other aspects to cover like the volatility, the blockchain technology behind it all, the halving, the importance of spreading your investment onto several cryptos, etc. One factor that often gets overlooked is the connection between Bitcoin and Altcoins. If you did your Google search, you probably found plenty of results that did more to confuse than actually help you. That is why we will further explain the basic concept and try to clarify it.
What are altcoins?
Let’s first cover the basics, and as the name itself says, they are alternative coins. Namely, even today, when someone mentions cryptos, our first thought is about Bitcoin, as it was the first one that came out, the one where it all starts, and crypto about which there is the most noise. Altcoins represent an alternative to BTC, and the term is basically used to describe other coins that may look the same as BTC but have slight differences.
Of course, one of the main advantages of BTC is that it has the most secured network, and that is the proof of work type of currency. That, and being the only universally accepted digital currency that you can use as a payment method, is the main reason why people tend to take actions guided by strictly what happens to BTC. Today, there are more than 9000 cryptos, and almost 40% are altcoins. That’s why in order to fully understand this market, you need to understand the connection between BTC and altcoins.
The market behavior
Like with any other market, the more you know about market behavior, the better the chances to manage profits. As for this market, the logic is simple as when the BTC grows slowly, the Altcoins is on the rise and vice versa. That’s because investors became impatient and start broadening their investment portfolio, and when BTC rises, people tend to sell Altcoins to gain more profits.
Now, what may interest you the most is about the value, and when the Bitcoin value drops, the Altcoins price drops even more because people tend to sell them to salvage their money. Of course, the Altcoins value also recovers much faster.
What to expect in the future?
It doesn’t matter how unpredictable this market may seem, if the past has taught us anything is that this statement is not exactly true. Digital currencies are on the rise, and they will stay so for quite a while now, but what may differ is the correlation between BTC and Altcoins. Namely, there were times when there were no connection and correlation between the value of Bitcoin and other cryptos, but there were also times when this correlation was above 90 percent.
If we take a closer look at those periods, we can notice a pattern. Today, there are several million more crypto users than just a few years ago, and that high number of users along with a diversity of available cryptocurrencies means that we can expect certain cryptos like Monero or Dash to follow the rise and fall of BTC price. On the other hand, we have USD Coin, which acts entirely opposite of them, as it correlates with BTC at around negative 5%.
The bottom line
Overall, since Bitcoin is still used as a synonym for all digital currencies, this connection will stay strong for quite a while, but that’s only one reason. Another one is, to put it simply, that people simply have more trust in BTC than in any other crypto out there, meaning that when something happens to Bitcoin, they will treat all other cryptos the same.
Now, with everything mentioned above, this connection between BTC and Altcoins should not give you as much headache as it did before. As you can see, the concept is pretty simple, but that doesn’t mean that even the slightest mistake wouldn’t cost you a fortune.
Now, you will not have to worry about that, but for those who are still don’t feel confident, as they need more info about Bitcoin and the crypto market in general, just check bitcoincodedenmark.com and get a detailed explanation about how it all works along with how to make the most out of your investment.