Bitcoin’s rise toward $23,800 triggered strong rallies in large-cap altcoins like Litecoin and Dogecoin
Litecoin (LTC) and Dogecoin (DOGE) posted strong increases as Bitcoin (BTC) set a new record at $23,800.
Many analysts argue that the rise of large-cap altcoins is directly related to Bitcoin’s price action. Historical data shows that these two tend to move in parallel over the course of BTC’s bullish and bearish cycles.
Signs of newfound momentum in altcoins bring greater confidence among traders in the strength of Bitcoin’s trend.
During the month of December, altcoins remained static relative to Bitcoin System, especially as BTC attempted to break out of the range between $18,000 and $19,400. However, this phase was characterized by low volume.
At that time, volume in the crypto market was declining, mainly due to Bitcoin’s continued rejection at $19,400. Thus, most of the volume moved into BTC and the altcoin market was temporarily deprived of its usual activity.
Bitcoin above $20,000 has rekindled interest in Litecoin and Dogecoin
Historically, altcoins that were born between 2011 and 2014 tend to rise following a strong positive movement in Bitcoin. These cryptocurrencies include Litecoin, Dogecoin, and XRP.
One of the main reasons behind the altcoin rally is volume. Traders often flock to altcoins, causing a spike in volume in a short period and causing huge volatility.
Because these cryptocurrencies have significant historical relevance, after the start of a rally their momentum usually lasts longer than other lesser-known small-cap altcoins.
Litecoin, for example, is up 57% in the past 7 days. In the same period, Bitcoin has gained 34%, even though it has surpassed $23,800 on major exchanges.
Analysts have identified a positive trend: altcoins are not seeing extreme volatility as they did in 2017. A pseudonymous trader known as MoonOverlord commented:
„One thing that never occurred in this uptrend was the panicked selling of altcoins every time $BTC moved 5%. In 2017, in an instant altcoins would plummet -25% during a 4% increase in BTC, it was terrible. Tether and stablecoins didn’t even exist so the only options were BTC or altcoins.“
Are the fundamentals supporting the current uptrend?
According to Qiao Wang, quant trader and DeFi researcher, Litecoin is not necessarily ‚digital silver‘ in the same way that analysts consider Bitcoin ‚digital gold‘.
Since its launch, the primary argument for Litecoin was its potential role as silver should Bitcoin become gold 2.0. Wang explained:
„If you’re new to crypto, you’ve bought BTC and you’re wondering what crypto asset represents silver if Bitcoin is gold: it’s not LTC, it’s ETH. The other day Paul Tudor Jones used an interesting analogy taken from the world of metals to categorize crypto assets. There are precious cryptos and there are industrial cryptos: BTC is precious, ETH is industrial. LTC is neither.“
Litecoin has strong fundamentals that could improve market sentiment. For example, the Litecoin team is in the process of activating MimbleWimble, a privacy solution originally designed for Bitcoin.
However, these fundamentals are not enough to sustain a 57% rise within a week. The main reason for the sudden rally in large-cap altcoins is likely a volume strategy put in place by high net worth investors and traders looking for quick gains after Bitcoin’s rise.