Description: The ‘contagion effect’ in the context of Bitcoin and other cryptocurrencies refers to the phenomenon where the performance of one cryptocurrency is influenced by the success or failure of another. This effect can manifest in various ways, such as price correlation, where a drop in Bitcoin’s value can drag other cryptocurrencies down, or conversely, an increase in Bitcoin’s price can generate optimism that boosts the value of other altcoins. This phenomenon is particularly relevant in a market as volatile and speculative as cryptocurrencies, where investor emotions play a crucial role. The interconnection between cryptocurrencies is due to factors such as market perception, the adoption of blockchain technologies, and the influence of news and global events. In this sense, the contagion effect can be seen as a reflection of market psychology, where investment decisions are based not only on technical fundamentals but also on group dynamics and the tendency to follow the behavior of other investors. This phenomenon highlights the importance of diversification in investment portfolios, as the dependence between assets can increase the risk of significant losses during periods of high volatility.
