[NathanCH]

I would love an analysis on who is moving the market today. In the last month there have been three occurrences where the price of BTC jumped 10% in a single moment (followed by equal sell-offs hours/days later).

Stranger still, all coins seem highly correlated. BTC goes up, all coins go up.

I realize this behavior is not new and the market has been highly correlated since the beginning, ...but why?

[jboles]

In a stock market, some companies outperform others by being more valuable at one moment than another. The difference in value results from differences in the companies’ expected future cash flows.

Crypto coins, despite ICO promises, have not historically been revenue generating assets, so there is no future cash flows generated by them. Thus they can be considered fungible, retaining the same value despite their different symbols and nominal prices. With the level of distrust in the ecosystem, only “bad” news affects a given ICO, sending its value to zero. Neutral news, or good news, does not increase a given coin’s price, so they all settle around the same “value”, and all their “values” move together.

When anyone or their pet monkey can clone a Git repo, change some variables, and launch their own ICO with zbsolutely zero proprietary innovation, it is to be expected that all crypto coins will approach the same value.

(I put “value” in quotes because different coins have wildly different prices, being a function of some variables in the coin’s software determining e.g. how many were “issued”, but you have to ignore those prices and instead think about the underlying “value” represented by the coin. It’s really not much at all — perhaps only the sunk cost of electricity, but likely less than even that.)

I would also love an analysis on what is moving the market. It has to be more than Tether at this point.

[abstrct]

Most exchanges that have coins other than Bitcoin use Altcoin/Bitcoin pairs. So you're not trading in relation to the US Dollar, you're trading in relation to Bitcoin.

For a trader, that means that to them 1 ETH is currently worth 0.02678663 BTC. The USD price of Bitcoin doesn't come into play here. So, if Bitcoin goes down, the relation to ETH means that it follows, since 1 ETH is still worth 0.02678663 BTC.

Edit: Why would they do this? A number of reasons, the biggest two being habit and volume.

Most coins are traded on networks that don't have fiat currencies, so they had to choose a cryptocurrency base. Also, many traders in the realm started out with Bitcoin, and love Bitcoin, and want more Bitcoin. So they don't care if a trade gets them USD, they just want to grow their BTC holdings.

Finally, with trading, volume is very important - you want as much being offered for sale as possible. If you split up every order book (btc/eth, xrp/eth, ltc/eth, usd/eth, xrp/ltc, xrp/usd, ltc/btc, etc etc) then the volume of each 'book' is divided amongst the options, making it harder to move larger amounts from one to the other.

[cesarb]

> Stranger still, all coins seem highly correlated. BTC goes up, all coins go up.

My current theory is that Bitcoin is the "reserve currency" of all these coins. That is, their price is better understood as being expressed in Bitcoins, not in USD or other currency.