Efficient markets maintain cross elasticity of demand and cross elasticity of supply. In addition to these forces, reliable cryptocurrency exchanges have established trusted cross pricing among cryptocurrencies pairs. This cross cryptocurrency denomination results in a money multiplying effect in the cryptocurrency market.
By either directly pricing a particular cryptocurrency in other pairs, or by increased liquidity readily accessible to anyone with a computer, bitcoin, ethereum, and other cryptocurrencies are increasing cross priced with other cryptocurrencies. This cross pricing is causing the cryptocurrency market to become more elastic relative to its underlying fiat demand.
For example, a hypothetical $20,000 purchase of ether could raise the entire cryptocurrency market by $100,000. Buying $20,000 of ether has a price inflating effect on bitcoin as bitcoin's value is somewhat priced in ether. By the time arbitrage is performed to absorb the purchase of ether, bitcoin's price relative to ether may outrun the utility of arbitrage.
Cryptocurrency markets now experience a sort of money multiplier effect, not through banks inflating the money supply by supplying customers loans, but through cross price action outrunning arbitrage.
Cryptocurrency market value is now less tied to value derived from fiat base money, which in this case could be thought of as liquid fiat money actively available for use in exchange of cryptocurrencies. Instead, a particular cryptocurrency value is more tied to this cross pricing. The larger this fiat base money supply, the much larger the cryptocurrency market value becomes.
State issues fiat has not been sufficiently divisible for such usage, causing price stickiness thanks to its indiscrete nature, but cryptocurrency's divisible properties allow "money creation" merely through division and cross pricing.
Bitcoin's decreasing liquidity, compared to a lopsided liquidity of fiat, may have helped spur the sudden explosion of cryptocurrency value. Bitcoin's decreasing liquidity due to unresolved technical issues helps increase cross pricing money multiplier effect. Holders may not have time to sell before markets reprice other assets, which are then in turn pricing bitcoin itself. This illiquidity may have caused a feedback loop in cryptocurrency. When purchasing however, services like Coinbase allow relatively quick purchases, a lopsided purchasing liquidity power of fiat relative to illiquid bitcoin selling.
This may also mean there could be extraordinary downward swings in value as markets adapt to this illiquidity.
Regardless of hypotheticals, cross pricing further removes bitcoin's value from being tied to fiat. Cryptocurrency is becoming a more closed system as internal cross pricing increases and external fiat pricing decreases.