The volatility of Bitcoin in the market has always been one of its significant characteristics. This volatility arises from multiple factors, and here are some core observations:
1. Supply and Demand
The total supply of Bitcoin is limited (21 million coins), while demand is influenced by investor interest, institutional participation, macroeconomic environment, and other factors. Changes in market sentiment often lead to drastic price fluctuations.
2. Market Size and Liquidity
Although Bitcoin has a high market capitalization, it is still relatively small compared to traditional financial markets, so large transactions can have a significant impact on prices.
3. Investor Structure
The Bitcoin market is participated by both retail and institutional investors. Retail investors tend to operate emotionally, while the entry of institutional funds can lead to short-term volatility and long-term trend changes.
4. News and Events Driven
Policy regulations, technological upgrades (such as halving or hard forks), hacker attacks, or major institutions announcing acceptance of Bitcoin payments can quickly trigger market reactions.
5. Market Manipulation
The cryptocurrency market currently lacks regulation like that of traditional financial markets, making prices more susceptible to manipulation by large holders ("whales").
6. External Economic Environment
Global economic turmoil (such as inflation, a strengthening dollar, or financial crises) may drive demand for Bitcoin as "digital gold," thereby affecting prices.
