Why bitcoin and other cryptocurrencies can rise and fall together
Wyre Talks: Studying the fundamentals through current market events.
Sometimes when you look at the graphs for an altcoin, it looks like someone just took some tracing paper up to the bitcoin chart and copied the line. This is not by coincidence.
In this entry of Wyre Talks, Wyre CEO Michael Dunworth goes through why different cryptocurrencies can go through a similar trajectory in price changes.
It’s a bit like traveling to a remote location. Places like the Sahara desert don’t have a conveniently located international hub with airplane runways in the dunes. You depart from a major airport that you have access to, fly to another major airport in the vicinity of where you’re trying to go, then you change your mode of transportation to smaller planes, cars, trains, camels, etc.
Much like the major airports become the gateways to more remote places, bitcoin or ethereum become the gateways to other more obscure tokens. In order to gain access to these tokens, you have to start with the U.S. dollar (in the U.S.) and convert that to bitcoin. The bitcoin now gives you access to the tokens you wish to purchase. When you want to sell these tokens, you usually have to retrace your steps, in order to get back to the fiat currency of your choice.
When it’s super bear markets or super bull, the whole market shifts. It shifts because when there is a bottleneck like this, the value of bitcoin or ethereum has a ripple effect that can cause drastic changes in other tokens (sometimes causing almost identical movements on other cryptocurrency prices).
Have any questions about cryptocurrency, international payments, or actually getting to the Sahara desert?
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