From bitcoin to altcoins and back …


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From bitcoin to altcoins and back ...

From bitcoin to altcoins and back: the circulation of money in the cryptocurrency market

  • Bitcoin remains the main investment asset

  • ETH and small-cap altcoins are able to generate profits faster and more

  • The fall in the price of BTC leads to a correction in the value of altcoins

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Despite the fact that Bitcoin is considered the main cryptocurrency, token As the use of cryptocurrencies increases, new types of tokens are emerging. They can represent value or something intangible like voices. Two … More ETH is able to generate profits faster and increase the value of other altcoins. This is the conclusion reached by analysts who studied the circulation of money in the cryptocurrency market..

From bitcoin to altcoins and back ...

Bitcoin spent six months in a bullish channel

Recent research shows that Bitcoin has been in a bullish channel for almost six months. After the coin bottomed out in March 2020, Bitcoin entered a bullish trend that continues today. Analysts themselves see this as a direct dependence on the strength of cash flows. At the time of the fall in the price of bitcoin, the lion’s share of fiat money was directed to the cryptocurrency market. Thus, investors tried to buy crypto assets at the lowest price..

β€œBut at the moment when the market reached the point of maximum pessimism in relation to cryptocurrencies, a maximum of new financial opportunities appeared,” the study said..

Buyers started accumulating bitcoin at lows after a sharp correction and accidentally became the pioneers who launched a new bull cycle for bitcoin. Each cycle in the cryptocurrency market begins with the investor’s capital flowing into bitcoin.

From bitcoin to altcoins and back ...

Then money flows from bitcoin to Ethereum and other altcoins.

Small-cap tokens are gaining popularity

During a bullish Bitcoin trend, investors have a growing need for higher returns on their cryptocurrency investments. This is why they are looking to diversify their funds into altcoins like Ethereum.

β€œEthereum is arguably the best-known Bitcoin alternative and is often the next logical choice for building a diversified portfolio. Although it is a well-established platform at the moment, Ethereum is still much smaller in market capitalization compared to bitcoin, ”the study says..

So, in theory, investing in Ethereum is more risky than investing in Bitcoin. However, on the other hand, investing in Ethereum will bring higher returns compared to BTC. Therefore, investors choose tokens with medium and small capitalization, which generate profits faster..

Small-cap altcoins are high-risk, high-return investments. They grow at the very end of the market cycle. This is why altcoins often perform much better than high-cap coins..

Earlier, BeInCrypto reported that bitcoin is losing out to small-cap altcoins. According to the latest research from Arcane Reserch, the ETH token became the leader in 2020 in terms of capitalization. Also, Bitcoin and its two forks Bitcoin Cash and Bitcoin SV, as well as the XRP token were included in the top 5 cryptocurrencies in terms of capitalization.

From bitcoin to altcoins and back ...

It follows from the study that bitcoin is the first asset to which fiat money is directed, and only then part of the funds is distributed between altcoins with medium and small capitalization. Thus, a correction in bitcoin prices will lead to a drop in prices for other coins..


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