Litecoin (LTC) and Dogecoin (DOGE) are booming now that Bitcoin (BTC) fight for stay above USD 23,800. Many analysts say that the rise in large cap altcoins is directly related to Bitcoin’s price action and historical data shows that the two tend to move together as BTC goes through bull and bear cycles.
As altcoins begin to show signs of a renewed momentum, traders are gaining even more confidence in the strength of BTC’s trend.
Throughout December, altcoins stagnated against Bitcoin mainly as BTC struggled to break out of the $ 18,000 to $ 19,400 range, but this was plagued by low volume.
At the time, the volume of the cryptocurrency market declined as Bitcoin constantly turned down $ 19,400. As such, most of the volume went to BTC and the altcoin market was temporarily deprived of trading activity.
Bitcoin’s break above USD 20,000 rekindled interest in Litecoin and Dogecoin
Historically, after a major Bitcoin rally, altcoins that existed from 2011 to 2014 have a tendency to rise. These cryptocurrencies include Litecoin, Dogecoin and XRP.
One of the main reasons behind this altcoin rally is volume. Traders love to pump up altcoins, increasing volume in a short amount of time and increasing volatility enormously.
Since these cryptocurrencies have significant historical relevance, the momentum when a rally begins typically lasts longer than other obscure smaller-cap altcoins.
Litecoin, for example, was up more than 57% in the past 7 days. In the same period, Bitcoin was up 34% despite surpassing $ 23,800 on major exchanges.
A positive trend analysts have noted that altcoins are not seeing extreme volatility like in 2017. A pseudonymous trader called MoonOverlord said:
One thing that never happened on this run was people panicked about dumping their $ ALTS every time $ BTC moved 5% in 2017. Was awful. Tether and stables really didn’t even exist, so you had to $ btc OR $ alts. “
Are fundamentals driving the current rise?
According to Qiao Wang, a quant trader and DeFi researcher, Litecoin is not necessarily “digital silver” in the same way that analysts consider Bitcoin to be “digital gold.”
Since its launch, the go-to argument in Litecoin’s favor has been that it could act like silver if Bitcoin becomes gold 2.0. Cheek said:
“If you are new to crypto, have bought BTC and are wondering which cryptoasset is silver to BTC’s gold. It’s not LTC. It’s ETH. Recently, Paul Tudor Jones used an interesting metal world analogy to categorize cryptoassets. There are precious crypto. And there are industrial cryptos. BTC is precious. ETH is industrial. LTC is neither. “
Litecoin has several strong fundamental factors that can cause the market sentiment around it to improve. For example, the Litecoin team enables MimbleWimble, a privacy solution originally designed for Bitcoin.
However, these fundamental factors are not enough to fuel a 57% rally in a week. The main reason behind the abrupt rally of large-cap altcoins is probably a volume play by wealthy investors and traders looking to make a quick buck in the aftermath of a Bitcoin rally.