What Does Bitcoin do for the Cryptocurrency Market?
Bitcoin is incredibly important to this market space as not only is the currency everyone references to when talking about cryptocurrency, it is the flagship of it's market sentiment. People see Bitcoins retracement as a negative sign for the rest of the market, as they take Bitcoin's price action as a reflection of overall market performance. This is an easy mistake for someone new to the market to make, as the primary asset of the market can be highly influential to it's
Not only this but Bitcoin is also the most popular cryptocurrency for exchanges alike. It is the gateway for buying into other cryptocurrencies and altcoins, and for this reason has a very high trading volume as a result. All exchanges have primarily a BTC deposit and exchange option, in which the currency is at the forefront of promotion for investing into other currencies. This works well for many as Bitcoin is very well received and is the first cryptocurrency many buy when entering the market, increasing their exposure to growth in the short term by doing so.
Necessity for Bitcoin
The absolute necessity of Bitcoin in the cryptocurrency realm is undeniable, as it is the primary currency encouraged to be used for purchasing other altcoins on exchanges. This means that exchanges are dependent on people using Bitcoin to support not only their revenue but also keeping other altcoins and tokens trading volume up on their platform. It also means that a large majority of altcoins are entirely reliant upon Bitcoin for customers to purchase their token/coins, and is indicative that their capital is directly affected by it too.
This leads to a constriction of liberty in the market as their are few options in which the majority of altcoins can be purchased with, and as the primary point of purchase is conducted using Bitcoin it is preventing the market from growing organically. Unfortunately as a result the performance of Bitcoin therefore effects the value of many altcoins as they are tethered by means of access to Bitcoins price action. People will psychologically not reinvest their Bitcoin at a lower price into an altcoin thats decreased equally as they are then in the short term making a loss on Bitcoin. But transversely they will refrain from keeping altcoin positions at highs/ lows because of FOMO on getting Bitcoin at a price that validates their assumption about it's value, by panic selling alts to buy BTC.
The Untethering - When Will it Happen?
The untethering of cryptocurrencies from Bitcoins performance will eventually come as the market develops and matures, as each individual cryptocurrency comes into it's own by providing true business and societal value to economic frameworks. When cryptocurrencies finally have their own reputation and business outlooks, the public and investors will have a better idea of the divisions of market sectors that different crypto's aim to specialize in. Examples of such are smart grid infrastructure and smart economy development , two unique potentials untapped and unfulfilled by current companies that will create a more dynamic and less monotonous market.
In the meantime exchanges can help matters by adding more payment options to dissolve Bitcoins monopoly on purchasing power by adding coins like Zcash, NEO, EOS and others for the same purposes. This would widen payment options and the range of sell opportunities for your profits. Many new blockchain projects like Crypterium and others aim to optimize the interoperability of all cryptocurrencies, hopefully in the meantime during market infancy this will be enough to demonopolize the amount of liquidity that Bitcoin provides cryptocurrency to better distribute value.
Let me know if you thing something else is bringing down the market with Bitcoin, and check out my last posts on a landmark case ruling Bitcoin as having "true economic value":