Bitcoin vs Altcoins Trading
Altcoins or alternative coins are Bitcoin`s opponents and at the very moment, the most advanced digital currency has more than 5000 different opponents. What can we do about it? We definitely can trade them!
Pump-and-dump
Most of the altcoins are designed by pump-and-dump groups. Who are they? These are groups of developers who make a lot of noise for their coin, promising investors unique and lucrative features. Many people follow the hype around these promises, eventually buying coins at a low price. These actions push the price of the coin higher and higher.
However over past years, only a few dozen altcoins have managed to stay relevant for today. They survive because of a strong community and the integration of some unique features that Bitcoin`s core does not have yet. Still, the Bitcoin community has competition with none of the altcoin communities. Till now Bitcoin`s community is the most supportive and loyal and it is touching every corner of the world. But why do many traders choose to speculate in the altcoin space too?
Normalize a chart
There are many altcoins to choose from, although most of them have no targets and will never be useful for us. But you always have a chance to buy a few low-cost altcoins to make a good profit before the price goes up.
So what do we do when we decide to trade Bitcoin against altcoins?
First, let’s take certain price movements and normalize them using the percentage of the base coin during the same time interval. In other words, we moderate a large altcoin fall or rise, by dividing the percentage change of the base coin.
The second thing we can do is to multiply the change of the altcoin by the percentage change in volume and divide by the percentage change in volume of the base coin. For more safety, we can multiply the whole, by the daily percentage change of the total cryptocurrency market capitalization. CryptoCompare and CoinMarketCap’s APIs give you access to all the necessary tools.
If you decide to trade Bitcoin against altcoins you have to learn that the chart will never show you the whole picture till you normalize the prices. Both Bitcoin and altcoins are super speculative, being on the opposite side from fiat currencies. Fiat undergoes high volatility under certain emergency situations like a financial crisis. While cryptocurrencies can move double numbers a day.
Lack or splash of interest
Despite the fact that the crypto market has a high money flow on a daily basis, trading opportunities still have limits. Trading altcoins against Bitcoin, cannot always define if a move has been caused by the lack of interest or by great demand in the coin. For example, if your altcoin is losing value against Bitcoin, it does not always mean that there is a lack of interest in alt. It could also mean that Bitcoin suddenly went into high demand.
Trading Bitcoin to altcoins can bring you a lot of profit when you carefully analyze and normalize the charts, but also you have to choose wisely which altcoins will be opponents to your BTC. We recommend deciding from the most important and valuable, among which for today we have Ripple (XRP), Litecoin (LTC), Bitcoin Cash (BCH), Monero (XMR), and EOS (EOS).
