user27: 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?


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?

user727: There are many algorithmic trading bots that take advantage of arbitrage 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.

27: <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.stack.imgur.com/rmkRE.png" rel="nofollow noreferrer"><img src="https://i.stack.imgur.com/rmkRE.png" alt="ADA-EUR 1 min candlestick" /></a></p>
<p><a href="https://i.stack.imgur.com/oyIjG.png" rel="nofollow noreferrer"><img src="https://i.stack.imgur.com/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>
 727: <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>
