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Alt Coin Investment Tip - Follow Bitcoin

Before I get started with this article, please note that this is all personal feelings. If you follow what is in here, you may make it big or you can lose it all. Never risk more than you can absolutely afford to lose!

Introduction

When it comes to making investments in crypto currencies, we want to ensure we are making the right decisions based on the data that we have available to us. Making the right decisions means making some money, and making the wrong ones means losing some money (and potentially everything). Luckily, there has been some information that has shown up time and time again that helps understand a bit more about what we should expect going in to the future. Keep in mind, though, that the market is open and nothing is a guarantee. While we can see these patterns, they will not necessarily hold true in every case, every time. With that said, I am going to be looking at one of the biggest indicators I have seen; the price of Bitcoin.

When I say that this is one of the biggest indicators I have seen when it comes to investing, it is because we have seen time and time again that as Bitcoin goes down in value, alt coins go down with it. As a result, we can view alt coins as being a bit more volatile than even Bitcoin is. While Bitcoin's situation affects itself, it also impacts all of the other coins that are dependent upon it. Realizing this is important to keep things in perspective when making investments. It is easy to think that each coin is different from all of the others, but unless they are completely separated from Bitcoin, at least in terms of their method of turning in to fiat, they are going to continue to be linked together.

Why The Trend Works

The reason why the trend works is because of the mentality of traders. As Bitcoin starts to go down in value, alt coins, by their nature, are going down as well (in terms of their fiat value). If Bitcoin goes down to half of its original value and alt coins stayed at the same value in terms of Bitcoin, their fiat value would be halved as well. But here lies the issue: people like to cash out as Bitcoin starts to go down hill.

So let us say that you are sitting on a stack of alt coins, and you see that their value is going to go down. What is the best plan? To start selling them off for Bitcoins, so that the Bitcoins can be converted in to fiat again. Now, others are doing the same thing, so the buy orders are being plowed through at a fast rate. As each buy order is filled, the amount offered for the coins continues to go down. This has now led to two issues that have to be dealt with:

  • Fiat value is dropping
  • Value in BTC is dropping

Both of these situations create a snowball effect that makes more and more people start dropping off their coins, often in what we consider as a “panic dump.” This means that people are selling their coins because they are afraid that their value will continue to go down if they do not jump ship right then and there. And, because of how other people look at the situation as they see the price continually going down, more people jump on board. This cycle continues until someone with enough buying power can boost the prices back up. As that happens, the alt coins will become more valuable once again.

What About Bitcoin Shooting Up in Value?

We have had some periods where Bitcoin shoots up in value significantly. While these have been somewhat rare (in that most increases in value have been somewhat slower movements), they do disrupt the investment area. This brings with it a very tough area to make a judgement call on. When the price of Bitcoin increases significantly over a short period of time, people start selling their alt coins to buy in to Bitcoin so they can try and cash out at its peak. This really has the same effect of Bitcoin going down in value (in that people want to be in the coin so that they can try and make their exit and earn as much as possible in the process). But it is not always true. While we can generally count on alt coin prices to go down as Bitcoin does, we can not always guess the same for it to go up. It has been somewhat hit and miss in this area so far, so you really just have to make a guess and hope for the best.

Playing the Ups and Downs

If you want to maximize your earnings when doing alt coin investments, you have to see the ups and downs before they happen, or while they are happening but have just started. If you see that Bitcoin is going down hill, you can assume that the alts are going to follow it shortly after. That would be the best time to start cashing out.

But let us think about this a step further; when do you buy back in? That is the hardest thing to answer, and it all depends on you and the amount of risk you feel is alright. You can usually buy back in when prices drop a little, to make some profit. Or, if you are more of a risk taker, you can try to hit the coin back when it is on its low, and earn a lot of profit. There are risks in both situations; you can either lose out on a lot of potential earnings, or not buy in on time and not make anything at all. Making the right decision in this, while it is tough, can be the difference between striking it big and not.

There is a Bit More to It

There is a bit more to the investing strategy than just hoping all coins are going to fluctuate with Bitcoin. While we can use the data above to help guess that the prices are going to go up and down accordingly, it is not always the case. There are periods where a coin will have some awesome news, or new investors will jump on board with one of them and shoot its price up. At the same time, there could be bad news or investors moving on to other coins, tanking the value of coins. So even if Bitcoin is staying stable, that does not always mean that another coin is going to be stable as well. The only part that we can really make an educated guess on is that if Bitcoin is tanking in value, the other coins are probably going to go down. At the same time, as Bitcoin shoots up in value, they are likely to go down as well, at least until it all starts to stabilize. While this is not always the case in every situation, it is often enough to at least put a little money on the assumption.

Investing


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