How alts behave when Bitcoin falls

The distinction between a common factor and a causal chain is not academic. If bitcoin's fall caused the alts' fall, then the sequence should be visible: bitcoin moves first, the alts follow, and the lag is measurable. If a common factor drove both, the two should move at the same time, and the observed ordering should be an artefact of which market is more liquid and therefore reprices first.

The evidence available at daily resolution cannot separate the two cleanly. Bitcoin is the deepest market in the complex, so it typically prints a new price before the thinner alt books have finished adjusting. That ordering is exactly what a causal story predicts and exactly what a common-factor story predicts as well, because the deeper market is always the first to absorb a factor move. The ordering alone does not decide between them.

What the common-factor reading adds is an explanation for the magnitude. If the alts simply followed bitcoin, there is no reason for them to fall further; a follower can move by the same amount or less. The larger fall is better explained by the alts carrying more of the same exposure, and by their books being thinner when the selling arrives. Both of those are properties of the assets and the venues, not consequences of bitcoin's move.

Dataset. Daily closing prices for bitcoin and for the largest non-bitcoin assets by market capitalisation, from CoinGecko's historical price endpoint, with Coin Metrics community data as a cross-check. Aggregated closes rather than a single venue's tape.

Period. The broad declines in the record from 2017 onward, the period over which the large alts have continuous daily quotes and a comparable venue landscape. The 2013 and 2015 declines are excluded because the alt market of that era was too small and too differently structured for the comparison to be meaningful.

Method. A decline is defined by a peak-to-trough move in bitcoin over a stated window, and the alts' behaviour is described over the same dates. Because the peak and trough dates differ slightly between assets, the comparison uses a common window rather than each asset's own extremes, which understates the alts' falls rather than overstating them.

Limitations. The asset set changes over time, so a comparison across a long period is computed across a changing basket. Assets that failed during a decline are absent from a current large-cap set, which biases the comparison toward survivors. And the mechanisms above are not separable from price data alone: distinguishing a shared seller from a shared factor requires flow and depth data that public series do not provide.