Why do currencies rise and fall at the same time (why do prices of each currency fluctuate the same way)?

Why do currencies rise and fall at the same time? The emergence of Bitcoin and Ethereum has changed people’s perception of the currency market trading model, and the same situation has also occurred in the blockchain world. When a cryptographic asset is considered highly correlated with other assets (such as stocks, bonds, etc.), it will have different price trends. In some unknown investment products, this situation can also result in the opposite prices of two tokens, while the other is “digital gold” or “shanzhai”, and the price fluctuations between the two are astonishing.

What is the reason for the simultaneous rise and fall of currencies? Simply put, there is a mutual influence between two mainstream currencies (such as ETH) and the result of mutual promotion. This means that these currencies are speculative assets within the same time period, and they will be exchanged within different time intervals to gain profits, thereby bringing huge risks. Therefore, for ordinary investors, either choose to hold one type and not invest in other currencies, or if you consider their potential market value, you need to purchase two additional types. (Image from Coinmarketcap)

Why do prices of each currency fluctuate the same way?

In the cryptocurrency circle, you never know which project will become a overlooked object in the market.

Because it is not something that every investor knows. So, no matter what investment you do, you need to understand this question: why do prices of each currency fluctuate the same way? Let’s take a look at the chart below:

Differences between the price of Bitcoin and other cryptocurrencies

After rising nearly 100 times from 2017 to early 2019, Bitcoin has now reached an unprecedented high;

Ethereum and XRP fell by about 30% and 50% respectively;

Ripple’s decline is greater while XTZ has risen significantly. How is the trend of Bitcoin currently? Do we still need to observe it when the next bull market appears?

If the bear market in 2018 was caused by the DeFi frenzy, then Bitcoin this year is destined to be a year of deteriorating macro environment, and the market sentiment is not good either. However, even so, this year’s bear market is also a reason for disappointment for many people. After all, while the heat of DeFi is rising, it has also caused many newcomers to miss the opportunity. However, for most beginners, there is no need to blindly pursue hotspots, chase after shanzhai coins, or follow mainstream assets. Instead, choose to focus on hot targets and constantly seek new gameplay or models. Because the risks involved in these games are smaller than most people imagine, so don’t hold fantasies. Of course, another possibility is that when everyone is still immersed in a bubble and does not want to face various unknown worlds, they try to take risks.

For example, a recent event: after US President Biden took office, many well-known companies have entered the blockchain field one after another. These include MicroStrategy (MSTR), CashApp, a subsidiary of Square, and payment processor SquarePay.

In addition, as regulatory agencies’ attitudes towards digital assets are becoming stricter, many countries are considering including digital assets in their financial product categories. For example, the largest bank in Japan has exceeded 1,000% against the US dollar for two consecutive weeks; Andrew Bailey, the Governor of the Bank of England, said, “I believe that the policies of various countries must be passed, so we need to study cryptocurrencies more.”

In addition to BTC, some other popular coins have similarities. They are all operating on the same starting line, such as EOS, LTC, and BCH.

Although there are huge differences between these two tokens. First, their value has not been uniformly verified, and secondly, they still have a certain speculative nature in the case of limited circulation of tokens in the market. At the same time, the different characteristics of regulations and policies in different countries make them unsuitable for pure investment. Another trend worth paying attention to is the increasingly fierce competition in various markets, whether it is the United States or Asia, the degree of globalization is still very low.