Bitcoin and the Majors

Bitcoin is the benchmark every other coin is priced against

Bitcoin is the oldest and largest cryptocurrency, and it works as the market's anchor in the way the US dollar works in forex: almost nothing trades independently of it. Its share of total crypto market value is called BTC dominance, and it is watched constantly. Rising dominance means capital is concentrating in bitcoin. Falling dominance usually accompanies appetite for smaller, riskier coins.

Around it sits a small group of assets with genuine depth. Ether is the largest smart-contract platform and the second-largest asset by value, and its price tends to track bitcoin with more amplitude in both directions. Below that, a rotating handful of top-ten coins have decent liquidity, and dollar-pegged stablecoins such as USDT and USDC act as the quote currency for most of the market rather than as trades in their own right.

Ten altcoins, one trade: the correlation arithmetic

Here is the number that surprises people. Suppose you hold ten altcoins at 2% of your account each, so 20% of the portfolio is at risk, and you think of it as diversified across ten positions. In a sharp bitcoin decline, large-cap altcoins have historically fallen with bitcoin at correlations frequently above 0.8, and they usually fall by more, not less. A 10% bitcoin drop that takes the average large-cap alt down 14% costs that 20% allocation about 2.8% of the whole account, all at once, from what looked like ten independent decisions.

Run it through the other way. If ten positions all lose together, they were one position at ten times the size, and you paid ten sets of spreads and fees for the privilege. The honest count of your exposure is not the number of tickers on the screen. It is the number of distinct things that would have to go wrong. In crypto that number is usually one, and it is bitcoin. The drawdown calculator shows what a cluster like that costs and what it takes to undo.

What actually qualifies as a major

• Bitcoin (BTC). The deepest book, the tightest spread, and the asset every macro headline about crypto is really about.
• Ether (ETH). The largest smart-contract network. Highly correlated with bitcoin, but with a larger beta: it typically rises more in rallies and falls further in declines.
• Large-cap alternatives. A changing set of top-ten assets. Liquidity is respectable during active hours and noticeably worse at three in the morning on a Sunday.
• Stablecoins (USDT, USDC). Not directional trades. They are the quote currency and a parking place, and they carry issuer and reserve risk of their own.

The membership of that third group changes. Coins that were top-ten assets in one cycle have fallen out of the top fifty in the next, which is a reason to check the list rather than to remember it.