What Causes the Simultaneous Drops in Cryptocurrencies?

The Cryptocurrency Market Moves as a Unified Entity

One of the most accepted phenomena in the digital asset world is the synchronized decline in prices. When Bitcoin or Ethereum experience significant corrections, almost all other cryptocurrencies tend to follow the same direction. This does not happen by chance—there are specific mechanisms behind this interdependence.

The main reason lies in the market structure. Major cryptocurrencies, especially Bitcoin (current price: $90.48K) and Ethereum ($3.09K), serve as a value proposition for the entire sector. When these flagship assets come under pressure, investors interpret this as a risk signal for the broader market, triggering a vicious cycle of selling.

Historical Examples: When Everything Moves Together

Historical data clearly offers lessons. In 2023, when the US Federal Reserve announced an unexpected interest rate hike, the crypto market collapsed within days. Bitcoin and Ethereum dropped by about 15% in a short period, while smaller altcoins simply crashed even faster.

Recently, in 2025, the introduction of blockchain technology resistant to quantum computers caused similar turmoil. Investors feared that existing blockchain systems would become obsolete. This uncertainty spread quickly, creating panic selling across the entire crypto market.

The Data Tells Its Own Story

Statistical analysis confirms this interdependence. Recent data from 2025 reveals that the correlation coefficient between Bitcoin and Ethereum remained above 0.89—a surprisingly high percentage indicating that price movements are often predictable between each other.

During major downturns, the total market capitalization of the crypto space typically shrinks by 20-30%. This is not a localized phenomenon—it is system-wide. Specifically, the Crypto Volatility Index (CVIX) often increases by more than 40 points during critical global economic announcements or technological threats, demonstrating the market’s receptiveness to external pressures.

Why Does This Happen? A Cause Map

Beyond numerical correlations, there are deeper psychological and structural dynamics:

Macroeconomic Factors: Changes in interest rates, inflation, and growth indicators affect the entire category of cryptocurrencies simultaneously.

Liquidity and Capital Multiplier: Major cryptocurrencies have greater liquidity. When investors allocate available capital, they start with these, resulting in a chain reaction of declines.

Herd Psychology: Investors often follow market movements rather than making independent decisions, amplifying movements in any direction.

Practical Tips for Investors

Understanding these dynamics is vital for prudent portfolio management. If you are interested in cryptocurrencies, follow global economic news and technological developments that could shake the market. Use this high correlation as a risk management tool—avoid concentrating capital in a single cryptocurrency, especially during periods of market uncertainty. Finally, develop an approach based on market psychology—identify patterns of panic and euphoria to gain a competitive edge.

The crypto market is not isolated—it is an interconnected network of influence, uncertainty, and collective behavior. The better you understand these links, the better you will navigate the turbulence.

###DISCLAIMER The article above has been generated by artificial intelligence (AI) and may not have been manually reviewed by a team member prior to publication. The content presented above does not represent the views of Gate.io or its affiliates. Likewise, Gate.io does not endorse the accuracy or truthfulness of the above data.