<p>There are many algorithmic trading bots that take advantage of <a href="https://www.investopedia.com/terms/a/arbitrage.asp" rel="nofollow noreferrer">arbitrage</a> between different exchanges &amp; token pairs.</p>
<p>In your example, the price of BTC/USD is decreasing. If the ADA/BTC price does not change, then the ADA/USD price will decrease by the same percentage. This is because arbitrage bots find opportunities where the implied price <code>ADA/USD / ADA/BTC</code> is different from the market price of BTC/USD, and buy/sell all 3 pairs quickly to capture that inefficiency as profit.</p>
<p><strong>tl;dr</strong> In order for the price of ADA/USD to remain the same, ADA/BTC would need to increase at the same rate that BTC/USD is decreasing.</p>

CC BY-SA 4.0
2021-05-24T00:19:36.823Z
Is ADA/BTC not determined by ADA-XXX-BTC with XXX being some fiat? With BTC/USD going down I would expect ADA/BTC to go up and ADA/USD to remain the same.
Peter1807
CC BY-SA 4.0
2021-05-24T00:28:52.930Z
Too late for an edit: I read up on arbitrage. With ADA/fiat, ADA/BTC and BTC/fiat being exchanged with independent rates, this arbitrage trading is very likely the reason for this market movements. This is probably the connection that was not obvious to me. I really underestimated the impact of these trading bots! That being said, your answer is what I was looking for! Thank you!
Peter1807
CC BY-SA 4.0
2021-05-23T21:17:18.803Z
2021-05-23T21:17:18.803Z
Ben NOBLE
<p>With the value of ADA being an important incentive to participate in the blockchain, and a stable value being an important indicator for the health of the Cardano ecosystem, how can the 1:1 mirrored short term price movements with BTC be explained?</p>
<p><a href="https://i.sstatic.net/rmkRE.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/rmkRE.png" alt="ADA-EUR 1 min candlestick" /></a></p>
<p><a href="https://i.sstatic.net/oyIjG.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/oyIjG.png" alt="BTC-EUR 1 min candlestick" /></a></p>
<p>Bitcoin is a proof of work blockchain that one may expect to lose in value with less climate-impacting proof of stake blockchains like ADA gaining popularity. Without an obvious connection between these two, many people could draw false conclusions from price developments observed in ADA (or other coins, for that matter)</p>
<p>While differences in individual market development can be observed in longer time-frames (which are NOT topic of this question), there seem to be correlations between the price development of BTC and the price development of ADA.</p>
<p>How can this be explained?</p>

CC BY-SA 4.0
2021-05-23T12:49:53.343Z
The prices are not always correlated (just look at the last couple months). When they are its because the drop in BTC reflects negative sentiment in the crypto market as a whole. Also, trading algorithms (bots) probably trigger on BTC fluctuations as well.
nalyd88
CC BY-SA 4.0
2021-05-23T15:56:03.613Z
I was talking about short term changes, as emphasized. I have added some screenshots to show what I mean. Of course, when looking at the long term development, ADA is overall more solid, which represents the solid foundation and better outlook. But where does this obvious behavior as seen in m screenshots come from? A crashing PoW blockchain should not impact other PoS blockchains in such a way. I would expect the opposite behavior. A negative crypto sentiment would only show slower changes, and not these 1:1 changes. My question remains, there must be a connection that is not obvious to me.
Peter1807
CC BY-SA 4.0
2021-05-23T23:13:20.563Z
This question has no clear-cut fact-based answer.  It is a matter of opinion and market speculation.
gRebel
CC BY-SA 4.0
2021-05-24T00:23:31.017Z
@gRebel, how is this opinion based and market speculation? I am looking for a clear-cut fact-based answer and already got the first replies. I don't want to know what influences the prices in general. I want to know, how it comes that the BTC movements are mirrored 1:1 on ADA. (Ignoring independent movement on ADA which can be seen over longer periods of measurement)
Peter1807
<ada>
How does the price of BTC impact the price of ADA?
# How does the price of BTC impact the price of ADA?

(Asked by: username_0 on 2021-05-23)

With the value of ADA being an important incentive to participate in the blockchain, and a stable value being an important indicator for the health of the Cardano ecosystem, how can the 1:1 mirrored short term price movements with BTC be explained?

[![ADA-EUR 1 min candlestick](https://i.sstatic.net/rmkRE.png)](https://i.sstatic.net/rmkRE.png)

[![BTC-EUR 1 min candlestick](https://i.sstatic.net/oyIjG.png)](https://i.sstatic.net/oyIjG.png)

Bitcoin is a proof of work blockchain that one may expect to lose in value with less climate-impacting proof of stake blockchains like ADA gaining popularity. Without an obvious connection between these two, many people could draw false conclusions from price developments observed in ADA (or other coins, for that matter)

While differences in individual market development can be observed in longer time-frames (which are NOT topic of this question), there seem to be correlations between the price development of BTC and the price development of ADA.

How can this be explained?

**Tags:** ada
> **Comments:**
> **username_1**: The prices are not always correlated (just look at the last couple months). When they are its because the drop in BTC reflects negative sentiment in the crypto market as a whole. Also, trading algorithms (bots) probably trigger on BTC fluctuations as well.  
> **username_0**: I was talking about short term changes, as emphasized. I have added some screenshots to show what I mean. Of course, when looking at the long term development, ADA is overall more solid, which represents the solid foundation and better outlook. But where does this obvious behavior as seen in m screenshots come from? A crashing PoW blockchain should not impact other PoS blockchains in such a way. I would expect the opposite behavior. A negative crypto sentiment would only show slower changes, and not these 1:1 changes. My question remains, there must be a connection that is not obvious to me.  
> **username_2**: This question has no clear-cut fact-based answer.  It is a matter of opinion and market speculation.  
> **username_0**: @gRebel, how is this opinion based and market speculation? I am looking for a clear-cut fact-based answer and already got the first replies. I don't want to know what influences the prices in general. I want to know, how it comes that the BTC movements are mirrored 1:1 on ADA. (Ignoring independent movement on ADA which can be seen over longer periods of measurement)  

---

## 1 answers

### Answer by username_3 on 2021-05-23. Score: 2 | Accepted answer

There are many algorithmic trading bots that take advantage of [arbitrage](https://www.investopedia.com/terms/a/arbitrage.asp) between different exchanges & token pairs.

In your example, the price of BTC/USD is decreasing. If the ADA/BTC price does not change, then the ADA/USD price will decrease by the same percentage. This is because arbitrage bots find opportunities where the implied price `ADA/USD / ADA/BTC` is different from the market price of BTC/USD, and buy/sell all 3 pairs quickly to capture that inefficiency as profit.

**tl;dr** In order for the price of ADA/USD to remain the same, ADA/BTC would need to increase at the same rate that BTC/USD is decreasing.

> **Comments:**
> **username_0**: Is ADA/BTC not determined by ADA-XXX-BTC with XXX being some fiat? With BTC/USD going down I would expect ADA/BTC to go up and ADA/USD to remain the same.  
> **username_0**: Too late for an edit: I read up on arbitrage. With ADA/fiat, ADA/BTC and BTC/fiat being exchanged with independent rates, this arbitrage trading is very likely the reason for this market movements. This is probably the connection that was not obvious to me. I really underestimated the impact of these trading bots! That being said, your answer is what I was looking for! Thank you!  

---

