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Altcoin prices are highly dependent on Bitcoin's movements, primarily due to Bitcoin's market anchoring position and the unidirectional flow of funds in the crypto market.
1. Fund Pool Linkage Effect: Bitcoin accounts for more than half of the total market capitalization of the crypto market, making it the primary target for off-market funds entering. When Bitcoin rises and attracts incremental funds, excess capital flows into altcoins; when Bitcoin falls, investors sell off altcoins to buy back Bitcoin or stablecoins for risk aversion, forming the pattern of “Bitcoin leads the rally, altcoins follow; Bitcoin leads the decline, altcoins are oversold.”
2. Market Sentiment Transmission: Bitcoin is the “confidence indicator” of the crypto market; its rise and fall directly determine the overall market risk appetite. During a bull market, Bitcoin’s profit-making effect encourages investors to take risks and chase high-altitude altcoins. During a bear market, Bitcoin’s decline triggers panic selling across the market, with illiquid altcoins often experiencing larger drops.
3. Pricing and Trading Mechanism Binding: Most altcoins are priced in Bitcoin units (such as ETH/BTC trading pairs), and many altcoin contracts, margin trading, and leverage are linked to Bitcoin. Bitcoin’s volatility will directly reflect on the relative prices of altcoins.