The price of several major big-name cryptocurrencies particularly fell after Bitcoin withdrew to $ 17,650 on December 9th.

XRP and Top Decentralized Economy (DeFi) Tokens YFI and AAVE have fallen 10-20% in the past 18 hours, while Bitcoin (BTC) has lost as much as 7%.

The two main reasons for the short-term correction in altcoins are likely to be the current high level of uncertainty among traders and lower overall volume.

Bitcoin price at a crossroads: Bad news for everything
Altcoins often reflect bitcoin price movements with more intense up and down price movements. Hence, as the price of BTC rises, altcoins tend to collect larger groups.

For example, Cointelegraph reported that XRP was up 91% in one month when Bitcoin began to climb to a permanent high on November 23. Bullish market sentiment around BTC has led to the emergence of alternative currencies with higher market value, including XRP and Stellar Lumens (XLM). To jump sharply.

But when Bitcoin begins to decline or market uncertainty arises, sharp corrections often occur in altcoins.

For example, over the past 24 hours, Bitcoin has fallen about 7% from today’s high to its lowest point. In contrast, XRP decreased by 15% over the same period, registering a greater price drop compared to BTC.

Altcoins are undergoing significant corrections due to their relatively low volume. Bitcoin remains the most liquid cryptocurrency on the market by a wide margin.

On Binance, the daily volume of the BTC / USDT pair as of December 9th is $ 1.5 billion. In comparison, Ether (ETH) and XRP have a trading volume of $ 600 million and $ 433 million, respectively.

Thus, lower volume cryptocurrencies face greater risk of loss in the short term when BTC falls.

Could altcoins start to recover soon?
Altcoins could start to recover in the short term if Bitcoin begins to rise convincingly. There are some signs that Bitcoin could lead the altcoin market to a strong recovery in the short term.

Cryptocurrency trader Scott Melker said the buying volume in the last four hours of the Bitcoin candle was greater than “some red lights on its way down”. If aggressive buying continues, the likelihood that the alternative currency will rise increases.

The size of Bitcoin futures. Source: Data on digital assets.
Another catalyst for the overall market recovery could be the sustained short-term squeeze in the Bitcoin futures market.

Raphael Scholes-Kraft, chief technology officer at Glassnode, noted that the long day trading volume on Binance has exceeded $ 130 million. Consequently, the price has decreased, causing the pressure to continue. He said:

“I think I might start buying on the flop when the long-term daily liquidation of #Binance exceeds $ 130 million. This appears to be a viable strategy to accumulate discounted BTC.”
Given that a large long squeeze led to a drop in BTC, a short squeeze is possible in the near future with $ 18,600 as short-term resistance.

However, one of those calculations to consider in the short term for alternative currencies is the Bitcoin Dominance Index. After the first decline in late November, the index is starting to recover somewhat, which could mean bad news for other currencies like XRP and XLM in the short term.

Source: CoinTelegraph

LEAVE A REPLY