Why Bitcoin price is so volatile? What are the major factors that drive it?

[Silberman]

If I may summarize the most popular answers - most people think that it is the low liquidity (available circulation) and a 24/7 non-stop trading environment that are responsible for the large volatility in Bitcoin.  Of course, small market cap and price manipulation also play a part of it.

That is without a doubt a factor but another factor has to do with the fact that there are many traders that use too much leverage, in the forex markets it is rare for a trader to go above 5x in leverage while in this market people can use as much as 100x leverage regularly, this means that when the market goes against them and their positions gets closed this reduces the price significantly and a domino effect happens making the price to go down very rapidly.

How can one get 100X leverage on Cryptocurrencies market?  Do you mean by placing $100 into the investment, I can buy up to $10,000 of cryptos?

That is exactly what I mean, there are many exchanges that offer this and this increases the volatility, this means that with a small sum of capital a trader can command and move more money than what it would be otherwise possible for him, however this is more notorious when the price goes down, have you ever wonder why the price goes down faster than when it goes up? This is because when the price moves too much downwards all of those people using leverage get a margin call and their positions get closed immediately, this means they have to sell their coins adding supply and decreasing the demand which lowers the price even more creating a chain reaction in the process.

[1715472295]

1715472295

[slaman29]

I get why volatility is not attractive for people who want to keep value and protect in in the medium and short term, but then who does that for Bitcoin anyway? Even with MicroStrategy and all those putting money into BTC, they're expecting to store it there for many years, not just a few months or even a couple of years.

Day traders and leverage traders should love BTC for this volatility too. So why all the hate?

[Sinjokubhi]

I am wondering why Bitcoin price is much more volatile than the stock market?

Let's just stick with Bitcoin only.  Bitcoin have a market cap close to $1T as we speak and, yet, its price is still so volatile.  Is it because the availability of bitcoins in the market is low as most people (especially the new institutional investors) are hodling? 

Is it fair to compare Bitcoin (or crypto market as a whole) to a stock market like SP 500 (which currently has $31.61 trillion market cap)?  If so, Bitcoin cap is only 3% of the SP500.  Is it because of its relatively lower market cap which make it easier for its price to be manipulated (i.e., by a pump-and-dump)?

What do you think?

There are a lot of things that affect the ups and downs of Crypto Asset prices, some of which are as follows:

1. Crypto Asset prices depend on the balance of supply and demand. This is the law of the market. When Crypto Asset becomes popular and there is a lot of demand, the price will go up. Vice versa, if supply is high while demand is low, the price will fall.

2. News or media coverage can affect Crypto Asset prices. For example, if there is news about hacker attacks on crypto servers, or even good news about the adoption and infrastructure behind crypto technology.

3. Crypto Asset price volatility is largely based on hype which often keeps interest high. A reliable price drop can be built on by a post on social media and the utterance of a world famous person

4. Deliberate Crypto Assets. In the field of Crypto Assets, news can really have a significant influence on the situation in the market
The amount or quantity is from the crypto assets themselves. The volume of crypto assets such as Bitcoin is still very small and the distribution is uneven so that its value will greatly support the actions of the crypto asset holders in making sales or purchases.

[batang_bitcoin]

Every market is known to be manipulated and easy to be manipulate by the whales. Comparing it with stocks and its nature of being volatile, I like bitcoin's volatility than the stocks. That's why I ponder that it is a better investment for which I'll benefit in the future and that's what's happening today and I did the right thing. Bitcoin's volatility can't be tolerated by everyone and if there are people who are good in stocks, they should stay on it.

[goaldigger]

Every market is known to be manipulated and easy to be manipulate by the whales. Comparing it with stocks and its nature of being volatile, I like bitcoin's volatility than the stocks. That's why I ponder that it is a better investment for which I'll benefit in the future and that's what's happening today and I did the right thing. Bitcoin's volatility can't be tolerated by everyone and if there are people who are good in stocks, they should stay on it.

Big investors will always move the market and that’s why Bitcoin becomes more volatile. I have to agree that Bitcoin is way more volatile and profitable compare to stocks but of course, this one will depend on the skills of every trader. There’s a lot of major factors that move the price of Bitcoin, its not just about supply and demand now, most of the time its about manipulation and the hype.

[Shasha80]

For me, the volatile price that occurs in Bitcoin is due to supply vs demand, fear vs greed and 24/7 Bitcoin trading. These three factors make
the Bitcoin price move very significantly and uncontrollably. Therefore Bitcoin trading is a very high risk activity. Because at one time we can
make very large profits, at other times we can experience huge losses. Very good strategy and analytical skills are needed to be able to read
Bitcoin price movements.

[batang_bitcoin]

Every market is known to be manipulated and easy to be manipulate by the whales. Comparing it with stocks and its nature of being volatile, I like bitcoin's volatility than the stocks. That's why I ponder that it is a better investment for which I'll benefit in the future and that's what's happening today and I did the right thing. Bitcoin's volatility can't be tolerated by everyone and if there are people who are good in stocks, they should stay on it.

Big investors will always move the market and that’s why Bitcoin becomes more volatile. I have to agree that Bitcoin is way more volatile and profitable compare to stocks but of course, this one will depend on the skills of every trader. There’s a lot of major factors that move the price of Bitcoin, its not just about supply and demand now, most of the time its about manipulation and the hype.

Bitcoin has been volatile since the day 1 with or without the big investors or those whales. It's already a character of bitcoin for which the whales have seen a good opportunity for them to make money from manipulating it. Most of them just got in when the price was already high and see how much money they can put into the market and move just as what they want to do with it. And being profitable in bitcoin, you don't actually to make yourself a trader, you just have to be good in buying and selling at the correct time and that's what's known as being a holder.

[jaberwock]

Volatility is usually the case with an emerging upstart market like Bitcoin. BTC price is almost entirely dependent on massive amounts of speculation demand vs. transaction demand. Most BTC holders are more interested holding bitcoins to profit off its increasing value than using it to utilize transactions.

There isn't really any value beyond its market price. Stability depends on how much adoption and overall development will progress over time.

I would agree to this but it then baffles me why the value of Bitcoins drops at certain times. The demand of Bitcoin in 2017 suddenly made it reach ATH and then it took 4 years to recover and double it suddenly this year. I know the value is increasing each day but what do those dumps suggest then, I wonder.

For example, People buy it as speculative asset, so once it reaches their goal,
they sell (contributing to the volatility of the price). Based on the example I just gave,
one of the major factors that drive the volatility is the 24/7 buy and sell orders!

Continuous orders happen in almost all the markets like stock market and I have done currency trading in past and there are 24/7 orders there too. I think it has more to do with the anonymous nature of Bitcoins that anyone can sell any amount without being noticed and same for buying.

It feels bad to say but a lot of people who earn black money invest in Bitcoins because they cannot be tracked.

[danherbias07]

For me, the volatile price that occurs in Bitcoin is due to supply vs demand, fear vs greed and 24/7 Bitcoin trading. These three factors make
the Bitcoin price move very significantly and uncontrollably. Therefore Bitcoin trading is a very high risk activity. Because at one time we can
make very large profits, at other times we can experience huge losses. Very good strategy and analytical skills are needed to be able to read
Bitcoin price movements.

It's the norm when you are trading.
You lose one day then you can get it back the next day.
Selling everything might be a bad idea though. I'd rather put a limit on how much I could trade.
Yes, higher profits will come to those who risk it all but what if it won't go the way on how you predicted it?
Always be prepared with the volatility. Somehow you could save all your losses by also saving some Bitcoin in your wallet.

[seoincorporation]

I am wondering why Bitcoin price is much more volatile than the stock market?

Is about the community, there are more users in the bitcoin markets than users in the stock markets... Is easy for anyone to buy bitcoin, even a kid can open an account on an exchange and buy coins with the Paypal account he uses for his games.

There are some whales and beers in the market, but take the example of Tesla... he buys 1.5B and that is less than 2% of the full market, so, bitcoin is volatile because there is a lot of people involved.

[Silberman]

I get why volatility is not attractive for people who want to keep value and protect in in the medium and short term, but then who does that for Bitcoin anyway? Even with MicroStrategy and all those putting money into BTC, they're expecting to store it there for many years, not just a few months or even a couple of years.

Day traders and leverage traders should love BTC for this volatility too. So why all the hate?

This is very common among average people, they want big profits but they do not want to understand that for that you need volatility and volatility cuts both ways, just as there can be a great growth there can be a great drop in the price as well, so I think this dissatisfaction with the volatility has more to do with the impossible goals that most people have when it comes to making money in bitcoin, traders accept the volatility and welcome it as they can make money with it, institutional investors think they can manage it and they invest in bitcoin too, but most people cannot handle it and instead of just turning their sights to other investment options they want this market changed so it fits their needs, which as we know it is impossible.

[slaman29]

Volatile is a quality that Bitcoin has. I am not very wise about this. However, it can be said that if it were not for Volatile, Bitcoin would not be so popular in the currency world today, its demand would not be so wide. Since everyone expects to profit by trading, if Bitcoin were not volatile, no one would trade here. Satoshi did not invent bitcoin or blockchain without a goal. Probably a factor as to why they're doing so poorly. In my opinion, that may be the reason.

That's what I've been saying for years and now that people are starting to whine about it again.

They loved it when Bitcoin jumped from $40k to 57k, so why should we be upset when it went down back to that levels in just as quick a timeframe? And it's back in between those ranges right now so I would be happy and take it.

Volatility makes people scared, but they forget they were excited too when they got in;)

[jostorres]

Let's just stick with Bitcoin only.  Bitcoin have a market cap close to $1T as we speak and, yet, its price is still so volatile.  Is it because the availability of bitcoins in the market is low as most people (especially the new institutional investors) are hodling? 

Is it fair to compare Bitcoin (or crypto market as a whole) to a stock market like SP 500 (which currently has $31.61 trillion market cap)?  If so, Bitcoin cap is only 3% of the SP500.  Is it because of its relatively lower market cap which make it easier for its price to be manipulated (i.e., by a pump-and-dump)?

Volatility mainly drives from being unregulated and I still think that it is a good think and not a bad thing, I believe we should probably just accept it as it is because we are profiting from it as well.

I get that people do not like it when it goes down so much so quickly, who would love to see 30% go down that is of course a bad thing for many people but we have also made 5x increase as well so if we didn't had that kind of volatility we couldn't make any profit like this neither. Long story short we are not in a bad situation with these volatile prices, we should see this as an advantage and just focus on buying more and more during drops and smiling during the bull periods .

[OcTradism]

Volatility mainly drives from being unregulated and I still think that it is a good think and not a bad thing, I believe we should probably just accept it as it is because we are profiting from it as well.

It is only existing in crypto market. This characteristic of volatility can not be found in other markets. There are circuit breaks in stock markets. The unrestricted margin of volatility for now gives us chances and risks. To get profit and reduce losses, we have to manage risks for our investments and tradings. By manage our portfolio and decentralize it.

I get that people do not like it when it goes down so much so quickly, who would love to see 30% go down that is of course a bad thing for many people but we have also made 5x increase as well so if we didn't had that kind of volatility we couldn't make any profit like this neither. Long story short we are not in a bad situation with these volatile prices, we should see this as an advantage and just focus on buying more and more during drops and smiling during the bull periods .

Make stop loss or stop limit for trades. If your position is on-going with profit but you want to take profit at higher targets, use positive stop loss for your profit. It will protect your profit and your capital. Don't be greedy and lose profit as well as capital with crash by too high volatility in crypto.

[tygeade]

Bitcoin is still a new a market and the $1 trillion achievement we have made is way less compared to the stock market. Maybe with time we will reach a higher market cap. But one thing I usually believe is that we need more retail investors than the big traders (whales) because the more that there are so many retail investors buying and selling cryptocurrency, the more it will become balanced, but when there are more of whales pumping and dumping with their billion dollars, the market will remain very volatile.

So, if we want a market that is stable, then we should aim towards having more of the smaller investors than the institutional investors. Take for example, Tesla bought $1.5 billion worth Bitcoin, what do you think will happen when they sell it? The market will drop for sure when that kind of money is removed.

[Kittygalore]

Bitcoin is still a new a market and the $1 trillion achievement we have made is way less compared to the stock market.

So, if we want a market that is stable, then we should aim towards having more of the smaller investors than the institutional investors. Take for example, Tesla bought $1.5 billion worth Bitcoin, what do you think will happen when they sell it? The market will drop for sure when that kind of money is removed.

I wouldn't consider bitcoin as new market, it has been ten or twelve years already, when are we going to stop calling it a new market, maybe its year of operation is dwarfed by stock market but I don't think that bitcoin is a new market. I do agree with you about resolving the volatility but I don't think that it will happen anytime soon, bitcoin is used by many to make profits and I think that they will do anything to have the volatility stay.

[decodx]

I wouldn't consider bitcoin as new market, it has been ten or twelve years already, when are we going to stop calling it a new market, maybe its year of operation is dwarfed by stock market but I don't think that bitcoin is a new market.
<cut>

What's different about bitcoin is that it's a completely new asset class. So, new to the market. But since the beginning of bitcoin, you could make a direct investment in the original bitcoin, the bitcoin digital currency. Of course, there is a lot of controversy. Some people say that these are two different types of bitcoin.

[el kaka22]

I believe that unregulated markets will always be volatile, because there is no stable situation in human nature, we always like to play big and make big decisions, because we do not want to make 10% per year and get rich in 30 years, we want to get rich right away today.

I also feel that way as well, if someone puts 10% of his salary into something that gives 10% profit per year for 30 years, of course depending on his salary but he will be very rich when he retires, some people work from 20 years old to 70 years old, that is 50 years, that would be insane amount of money when you retire if you are lucky. But I will be 70 years old by that time, I may have maybe 5 to 20 years at most, 90 years old people can't really do much, so I say 5 to 10 years at the very most, why be rich when I am barely alive when I can be rich a lot earlier? That is why I want to make a profit and retire before 40 so I can enjoy retirement for 40 years.

[Kittygalore]

~

What's different about bitcoin is that it's a completely new asset class. So, new to the market. But since the beginning of bitcoin, you could make a direct investment in the original bitcoin, the bitcoin digital currency. Of course, there is a lot of controversy. Some people say that these are two different types of bitcoin.

Is it still a "completely new asset class" when there are a lot of copycats called altcoins out there and twelve years has already passed? I am curious, what is this two type of bitcoin that you are talking about? And can you elaborate them with some brevity.

[Silberman]

Bitcoin is still a new a market and the $1 trillion achievement we have made is way less compared to the stock market.

So, if we want a market that is stable, then we should aim towards having more of the smaller investors than the institutional investors. Take for example, Tesla bought $1.5 billion worth Bitcoin, what do you think will happen when they sell it? The market will drop for sure when that kind of money is removed.

I wouldn't consider bitcoin as new market, it has been ten or twelve years already, when are we going to stop calling it a new market, maybe its year of operation is dwarfed by stock market but I don't think that bitcoin is a new market. I do agree with you about resolving the volatility but I don't think that it will happen anytime soon, bitcoin is used by many to make profits and I think that they will do anything to have the volatility stay.

Well, bitcoin is often compared to gold and since it has been around for thousands of years way before the modern markets were even invented I think we can still consider bitcoin as a new market despite its age, but in a way you are right, this market is finally maturing and we know this is true because institutional investors are finally getting in and it is unlikely they are coming to market that is known for its volatility thinking on selling as soon as possible, so I while I don't think we are quite there yet it is clear we are in a period in which bitcoin is slowly maturing.