Have you ever wondered why so-called altcoins seem to be more sensitive to macroeconomic data than altcoins? Bitcoin?

According to Matt Mina, cryptocurrency research strategist at Swiss asset management firm 21Shares, traders can look to George Soros, the American investor and philanthropist who... Breaking the famous British pound Back in 1992.

Mina said that Soros began developing his theory of reflexivity in the 1950s, and although the concept of trading has roots in traditional finance, Decryption It can be applied to cryptocurrencies as well. Effectively, Soros's theory of reflexivity focuses on feedback loops among investors, where price movements influence their behavior, which in turn affects prices further.

When it comes to digital assets other than Bitcoin, those with a relatively smaller market cap are better Ethereum and Solana Her nature is more contemplative, making her particularly susceptible to reflexive cycles, Mina said. Expectations of interest rate cuts by the Federal Reserve also came Markets driven Over the past week, cryptocurrencies other than Bitcoin have faced greater volatility.

“When macro data indicates improved liquidity, such as the possibility of the Fed cutting interest rates, this often leads to increased risk appetite,” he said. “Capital flow into altcoins, driven by the expectation of higher returns, tends to amplify price movements.”

After Wednesday's inflation snapshot, which... calm Due to inflation fears, Bitcoin price rose 3.8% from $96,800 to $96,800. $100,500 Over the course of about 12 hours. Meanwhile, Ethereum and Solana shares jumped 7.1% to $3450 And 10.7% to $206respectively.

By TradFi standards, Bitcoin is considered volatile. But the asset is more established than its higher-volume cryptocurrency counterparts Institutional adoptionThis makes it less vulnerable to a reversal, Mina said, adding that its reputation as “digital gold” provides a bit of a buffer.

While Soros's reversal theory could help explain the huge volatility of altcoins, said Tony Acuña Rutter, CEO of EDX Markets, an institutional-only cryptocurrency exchange, Decryption There are other factors that can cause chain reactions in the cryptocurrency market, such as liquidations.

Liquidations occur when an exchange forcibly closes a trader's position, often due to insufficient funds to cover the leveraged position. By borrowing money from the stock exchange, leveraged trading allows traders to control a larger position, magnifying potential returns and losses.

When Bitcoin fell to $92,000 in late December, after falling from its record price of $108,000 just three days earlier, Liquidations increased. The decline, which coincided with a change in the Federal Reserve's expectations for interest rate cuts, led to liquidations worth $1.4 billion, according to Reuters. Queen Glass.

Furthermore, margin calls and stop orders can exacerbate exchange-wide price volatility, Acuña-Rohter said, describing them as potential risk management tools due to the overall structure of the cryptocurrency market, which is spread across many exchanges.

“In crypto, (the markets) are very fragmented,” he said. “Exaggerated movements can become even more exaggerated, not just from macro factors, but through micro-risk management tools.”

Modified by Andrew Hayward