Will BTC Decline Impact Crypto Market Overall? What Is Next?

1. Will BTC decline impact the crypto market overall?

There are nearly 10,000 cryptocurrencies in existence as of February 2022 but the pressing majority of them has little to no trading volume. The number of cryptocurrencies with daily trading volume above $1 billion was 14 as of February 23, 2022. The list is attached below.

cryptocurrencies trading volume

Interestingly enough the list of cryptocurrencies with daily trading volume above $1 billion matches the list of 16 cryptocurrencies with the highest market capitalization with two exceptions – it does not include Shiba Inu and Terra USD, their 24-hour trading volume is under $1 billion, according to Coinmarketcap.com.

Another noteworthy feature of the list of 16 cryptocurrencies with the highest market capitalization is the fact that together they account for 84.63% of the total cryptocurrency market capitalization of $1.3 trillion. And 6 cryptocurrencies with the highest market caps, together with Litecoin, account for about 73% of total cryptocurrency market capitalization. The pie chart below reflects their market shares as a percentage of total cryptocurrency market capitalization of $1.3 trillion.

 

 Cryptocurrencies market shares as of February 23, 2022

Two cryptos with the highest capitalizations - Bitcoin and Ethereum, account for over 60% of total market capitalization together, with Bitcoin capitalization making up 41.75% of the $1.3 billion total cryptocurrency market capitalization as the data above indicate. This fact alone hints that changes in Bitcoin price should materially affect the crypto market overall.

This hypothesis can be tested by looking at price change dynamics of top two cryptos by market cap – Bitcoin and Ethereum. The wo charts below display price change dynamics for Bitcoin and Ethereum on the same chart for two periods: Sep 2019-Feb 2022 and Dec 2021-Feb 2022, on weekly and daily timeframes respectively.

(Click on image to enlarge)

Chart 3: Percentage price change Sep 2018-Feb 2022

Chart 4: Percentage price change Dec 2021-Feb 2022

As is evident from both charts, Ethereum follows Bitcoin’s lead: the two top cryptocurrencies rise and fall together almost always! So the answer is positive: BTC decline directly impacts crypto market overall.

2. What is next for Bitcoin?

The current bias is clearly negative for Bitcoin, as the chart below indicates. Bitcoin will continue falling this week, and I expect it will trade in the yellow box as shown on the chart. It will test the support, next support is at $34666, it will reflect off from that level.

(Click on image to enlarge)

3. What is next for other Cryptocurrencies?

I expect other cryptocurrencies will follow Bitcoin’s lead. Therefore other cryptos will exhibit the same dynamics -  they will continue falling next week but should reverse their sliding at the end of the week.

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