Namely, XRP and top decentralized finance (DeFi) tokens, YFI and AAVE, dropped by as much as 10% to 20% in the past 18 hours with BTC losing up to 7%.
The two main reasons behind the short-term correction of altcoins are likely the current high level of uncertainty among traders and low overall volume.
Bitcoin price at a crossroads – bade news for alts
Altcoins often reflect the price trend of Bitcoin with steeper price movements to both the upside and downside. As such, when the BTC price moves up, altcoins tend to see even larger rallies.
For instance, Cointelegraph reported that XRP surged 91% in a single month when Bitcoin began to rally toward its all-time high on Nov. 23. The bullish market sentiment around BTC caused large market cap altcoins, including XRP and Stellar (XLM), to spike significantly.
However, when Bitcoin begins to pull back or there is uncertainty in the market, altcoins often see sharp corrections.
In the last 24 hours, as an example, Bitcoin dropped by around 7% from the day’s peak to the lowest point. In contrast, XRP plunged by 15% in the same period, recording a substantially larger price drop compared to BTC.
Altcoins see intense corrections because of their relatively lower volume. Bitcoin remains the most liquid cryptocurrency in the market by a large margin.
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