Bitcoin is the main powerhouse if the crypto world that drags everything else with it. If Bitcoin goes up, the market goes up. If Bitcoin crashes, then everything crashes. This is pretty much common knowledge, but I have encountered quite a few people lately that are new to crypto and did not know this and occasionally they even wonder how is that even possible that the entire market suddenly drops, all at the same time, following the exact same curve? It must be a scam and all manipulated because no way this is a “natural” occurrence. But actually, it is.
The below is a rough explanation of one of the reasons, amongst many, why this happens. There are other reasons too, some may affect it more some may affect it less, but this one gives a good idea about why it is a logical consequence of Bitcoin pulling the market so that it is not caused by some unknown Great Manipulator in the shadows, but it is a natural phenomenon.
It is all basically happening because there is a trading pair (BTC/USDT) that have both its coins traded with most other coins, like when there is a new coin added to exchanges it is very likely it will be set up as trading pairs with Bitcoin and USDT so by now, there are trading pairs on most exchanges between any coins and Bitcoin (BTC) and any coins and Tether (USDT). This means you can trade your coins for Bitcoin and for USDT amongst others. So if there is a sharp move on the BTC/USDT pair, it imbalances the price of other coins that also trade between both coins, generating a pressure to follow.
So first, let’s assume we have 1 Bitcoin (BTC), 1 Tether (USDT) and 1 Tabby Cat Token (TCT). They all have trading pairs with each other, so there are BTC/USDT, BTC/TCT and also USDT/TCT pairs.
For simplicity, let’s assume 1BTC=1USDT=1TCT meaning you can buy 1 Bitcoin for 1 USDT or 1USDT for 1TCT or 1 Bitcoin for 1TCT. This is the balance state.
If Bitcoin drops to half of its value against USDT because someone sells a large amount of it for USDT pushing down the price, it is easy to see that suddenly the TCT/BTC and TCT/USDT price will become imbalanced. Before the deal it was 1TCT=1BTC and 1TCT=1USDT but when Bitcoin dropped to half its price against USDT it created a market price pressure on TCT since at that point 1TCT did worth 1USDT but also did worth 1BTC directly but 2BTC indirectly through USDT. So indirectly TCT went up against Bitcoin resulting in sell orders driving the price of TCT down too following the price of Bitcoin.
Since the above happens quickly, pretty much in real time, all we can see is that when Bitcoin moves, most of the market also moves with it.
Of course, this is just one of the reasons, probably not even explained very well or accurately, but I find it simple enough to make some sense in the “everything moves together” events so some people may sleep better when they understand that it is just a logical consequence of the aligned stars (Bitcoin and USDT) and not an elaborate market manipulation of some major scammer.
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