"A sharp Bitcoin decline often triggers systemic contagion, driving altcoins lower through both liquidity and confidence channels. During crises, the market tends to view crypto as a single risk asset rather than valuing individual utility, as seen in the high BTC-ETH and BTC-XRP correlations. Correlation and beta analyses are essential for quantifying how deeply Ether and XRP depend on Bitcoin's performance."
"Monitoring correlation indicators, using derivatives and maintaining stable or yield-bearing assets can help hedge against Bitcoin-related shocks. The dominance of Bitcoin (BTC) in the cryptocurrency market has long been the defining feature of crypto cycles. But what happens if Bitcoin's dominance fades or its price plunges by 50%? In that scenario, two of the largest coins, Ether (ETH) and XRP (XRP), become critical test cases for how the market reshuffles."
"In traditional equity markets, when the biggest player in a sector stumbles, the ripple effects are immediate. Smaller firms often lose value as they depend on the leader's ecosystem, investor confidence, supply-chain links and reputation. The same logic applies to crypto: Bitcoin serves as the anchor asset. When Bitcoin weakens, the entire market loses its sense of stability and direction."
Bitcoin's dominant market position means a large BTC price plunge often drags the broader cryptocurrency market lower. During stress periods, investors treat crypto as a single risk asset, increasing correlations between Bitcoin, Ether and XRP and amplifying contagion through liquidity and confidence channels. Quantitative tools such as correlation and beta analyses quantify how much ETH and XRP depend on BTC movements. Hedging approaches include monitoring correlation indicators, using derivatives, and holding stablecoins or yield-bearing assets to mitigate spillover losses. A 50% Bitcoin collapse would make ETH and XRP critical test cases for market reshuffling and risk assessment.
Read at cointelegraph.com
Unable to calculate read time
Collection
[
|
...
]