The Mistake Many Crypto Traders Make by Focusing on Bitcoin

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January 14, 2020 by
The Mistake Many Crypto Traders Make by Focusing on Bitcoin

There is a bullish colouration across the board in the cryptocurrency marketplace. Based on information from CoinmarketCap, majority of the cryptocurrencies are posting significant gains against the US dollar. This has caused some degree of excitement among cryptocurrency users, especially speculators.

Bitcoin Dominance Can Be Misleading

Across the industry there is a major focus on the price of Bitcoin. The reasons for this are not far-fetched, since Bitcoin remains the largest cryptocurrency in the marketplace. At the time of writing, Bitcoin retains about 66.6% dominance in the cryptocurrency market. What this means in simple terms is that 66.6% of all the funds in the cryptocurrency market is held in Bitcoin.

The popularity of Bitcoin has left many cryptocurrency users blinded towards the existence of many other cryptocurrencies in the market. At most, many users can only relate with the top 5 or top 10 cryptocurrencies. Any other crypto that they have information about may be as a result of circumstance. Perhaps, they participated in the crowdfunding processes of such cryptos. Outside of these, they remain oblivious to whatever happens to the other thousands of cryptocurrencies in the marketplace.

This could be a dangerous development, especially among those who risk their investments to participate in the cryptocurrency market. For instance, if the entire market turns green within a given period of time, rather than celebrating the rise of Bitcoin, shouldn’t we be looking out for the common factor across the many cryptocurrencies that are increasing in price?

The rate at which individual cryptocurrencies have responded to the bullish trend so far varies. This reflects the extent of their individualities and what might be going on behind the underlying projects momentarily. However, the fact that almost the entire market is turning green at the same time will suggest that it is the common denominator that is responsible for the move that we are seeing. 

The Perspective of an Expert Trader

In an earlier post, we identified how the happenings in the United States have influenced the price of Bitcoin. Perhaps, the current trend is still related to the events across the giant of North America. If Bitcoin and thousands of other cryptocurrencies are gaining on the dollar, it is logical to assume that it is the dollar that is losing strength. This is how a speculative trader should think, and that is where investigation into the fundamental factors across the markets should begin.

Market trends are initiated by catalysts. Several other factors may follow by picking up the momentum. By interpreting the charts and carrying out technical analysis, a given trend can be extended. Also, other factors like the Fear Of Missing Out (FOMO), and bandwagon behaviour can contribute to market behaviour. However, knowing the root cause of a given trend is a more guaranteed measure towards a successful career in all kinds of online trading.

The recent bullish movement has seen the price of Bitcoin reach $8,700 for the first time in about two months. This development is generating more support to the belief that Bitcoin will continue its recovery in 2020. However, it is imperative for any crypto trader to understand the reason for whatever is happening at any given time.

If the entire cryptocurrency market is green, then it will be improper to simply assume that Bitcoin is growing in strength. Other than that, it could be the US dollar that is failing in price due to obvious reasons. As a trader, it is advisable to always employ a holistic approach and view the market from a broader perspective. There is a whole cryptocurrency marketplace out there, it is not only about Bitcoin.

 

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