The Altcoin Echo Effect
Profiting from BTC price trends echoed in Altcoins.
There is an important relationship between Bitcoin and Altcoins most cryptocurrency investors and speculators don’t give enough attention too.
The Altcoin Echo Effect may just be a fancy way of bringing attention to the correlation and between altcoin and bitcoin prices.
As can be seen in the chart, there is a strong correlation between Bitcoin and Altcoin prices. The correlation gets stronger over time, especially after January 2017. Within this correlation BTC market dominance also needs to be taken into consideration.
Why is this important?
If you are looking to earn maximum gains, as a cryptocurrency investor, you should be paying attention to the trending prices where in a perfect world the sale of the Altcoin would look something like this:
In a perfect world, profit looks like this:
→ Bitcoin Goes up 15%;
→ The Altcoin Goes Up 25%; (echoed and multiplied in the same period)
Your Return Total: +40%
I call this the double bounce because the total profit made from this investment is made from both an upward swing in the BTC and Altcoin price.
This dynamic is illustrated well in physics and is known as the interference phenomenon.
The Interference Phenomenon:
The interference phenomenon is when two waves superpose to form a resultant wave of greater, lower, or the same amplitude. These are known as either constructive or destructive interference.
According to Wikipedia,
Constructive and destructive interference result from the interaction of waves that are correlated or coherent with each other, either because they come from the same source or because they have the same or nearly the same frequency.
For example, constructive interference would look like this:
Notice that the new wave is a combination of wave A + B. This is the double bounce.
Just as there is constructive interference, there is also Destructure interference. This is when one of the waves cancels out the other wave.
To use Altcoins as an example, this would be when the gains/losses in BTC canceled out the gains/losses in the Altcoin.
There is another rare event which takes places between waves and this seemingly random phenomenon which is called a Rogue Wave and as a cryptocurrency investor, a phenomenon I am really fascinated with.
The Rogue Wave:
If we look to science, every now and then a unique and seemingly random event takes place when waves oscillate to a very specific frequency.
Rogue waves (also known as freak waves, monster waves or killer waves) are unusually large and suddenly appear (seemingly without warming) on the surface of the water.
Rogue waves seem to be random and not to have a single distinct cause, but occur during a perfect storm of factors such as high winds and strong currents resulting in a rogue wave.
This phenomenon can be seen reproduced in the laboratory:
Rogue waves aren’t just isolated to water. They are a natural phenomenon and ubiquitous in nature. In a 2015 paper that studied the behavior of rogue and Draupner wave, and concluded:
“Rouge events do not necessirly appear without warning. They are often preceeded by a short phase of relative order”
If physics tells us anything, it’s not a question of if but when the next rogue wave will hit. There are signs to indicate when the next will happen.
In 2017, Ripple (XRP) made gains of over 36,000%.
Is the timing almost right for the next rogue Altcoin?