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

[Bitcoin Guy]

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?

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[GreatArkansas]

Bitcoin price is volatile could because of some reasons.

• Speculation - different views on Bitcoin. If you are not familiar with or no knowledge at all of Bitcoin, you will not buy it.
• Bitcoin is still early - a lot of people still not introduced to Bitcoin. Less adoption, less trading volumes.
• 24/7 can be traded. Compare with stock markets that they have opening hours and closing hours for trading

Comparing other assets with Bitcoin especially with the stock market is good with the price only, but technically on fundamental, they are totally different. And they're also some charts that showing some correlations with other assets' price on Bitcoin price, just like gold.

I believe having a lower market cap, is more prone to price manipulation, whales can able make some move to price themselves.

[Ryker1]

Well, this is very technical for me but as far as I know why bitcoin is volatile just because of different possible factors, --that's it. There are too many factors to consider and the reason why it is volatile. In my own, the ^{[market size, fixed amount, and the low liquidity]} are those common reasons why bitcoin will fluctuate and becomes very volatile often. I think the trading activities will make bitcoin so volatile, those tiny, small, and becomes big transactions was contributed to becomes bitcoin move the price that can create volatility price.

[dothebeats]

You can factor in the "openness" of its market. With such nature of the market, anyone and everyone can freely buy and sell at any given point in time they so do like. They can literally buy and sell millions or billions without restrictions in time and in the platform provided that they are properly ID'd for KYC and AML regulations. This perhaps is the main reason I see as to why bitcoin is highly volatile, though its nature as a highly-speculative asset can still be included together with the open-market nature as well.

I believe having a lower market cap, is more prone to price manipulation, whales can able make some move to price themselves.

Prone, yes, although even high market cap assets can still be a target to wash trading and price manipulation. Price alone isn't what matters in manipulation of assets. Volume plays a major role, and this is what most people used to exploit heavily together with the price in crypto and other asset class as well.

[Hydrogen]

Market trading of assets are war zones. There is natural competition coupled with greed, politics and other variables.

Observed low volatility trading doesn't imply competition, greed, politics and similar factors were removed from markets. But rather that traded assets tend to reach a point of equilibrium where those factors relatively cancel each other out to produce low volatility environments.

Concepts like stability, balance and low risk are correlated with low profit potential. While instability, imbalance and high risk are correlated with a high profit potential.

In bitcoin's case it is one of few inflation protected assets, trading in an environment which could be prone towards high inflation concerns. It is also deflationary which in ways is unprecedended. It is also controversial in ways with some claiming its good for society, and others claiming its the opposite. Bitcoin is far from reaching a point of equilibrium or consensus value and so it will be traded in ways which translate to volatility.

[Baofeng]

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

It's decentralised to begin with, no central authority to control the whole ecosystem, and with a market that is open 24 x 7 x 365 it will be very volatile as there are constant buying and selling. And then we have whales and average joe traders competing against one another, so it will be a place like a battle ground so I don't think it i fair to compare it with Stock market like SP 500, it's very different.

[kawetsriyanto]

You must know all crypto coins are possible for pump-dump, not only Bitcoin.   
Well, we cannot deny that sometimes the fast moves of Bitcoin price can be caused by manipulation. But it is not always to happen, mostly the volatility occurred because of the demands in the market. Since it is a bullish trend, people very fast to make decisions, sometimes buy more and sometimes sell more. This triggers the very volatility of Bitcoin price right now.

[nitrobetting]

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.

 

[oktana]

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!

[just_Alice]

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?

I think the main reason why Bitcoin is volatile is the fact that most people buy only a small amount of btc, and, yes, probably they rarely trade with what they have partially. Those who are interested in long-term investments just hodl, and the ones who are using btc for money transfer probably sell it right away, so that the price volatility won't affect the amount they send/receive. So, as a result, only a few people (relatively to all the btc users) acquire btc in large quantities and "play with it". And when they do - it affects the price drastically, because of their large-volume transactions that account for a big part of daily trading volume.

[posi]

There are alot of factors that make Bitcoin price to be volatile but what triggers the market volatility is the level of supply and market demand for bitcoin on various exchanges (which is also what make the price of Bitcoin to be different on each exchange site), negative news which causes panic sell and the market price prediction been built on speculations (which give some influential power to manipulate the market using message/post an example is Elon).

[crwth]

As for the other members here that have posted have said pretty much it but in addition to it, I think one that highlights it primarily is that the market is 24/7. It doesn't stop and the market is all over the world, not just domestic. Imagine all around the world people are looking at the price and making speculations into what the price could be in the following days, weeks, or years. It's basically warfare in which everyone wants to have that piece of the pie. Which is money.

A lot of people take advantage of the 24/7 factor by trading it with trading bots. It makes it even more volatile because it continuously trades for the trader and just does it non-stop. It's an addition to volatility.

[dihari]

Since the first day when bitcoin start having a value, bitcoin price is drive by trust. People trust making bitcoin have a value, and that factor also drive these volatility.
But there's some other factors also impact bitcoin volatility; halving, miners, fud, news, government, and Elon.

[Silberman]

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?

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.

[Bitcoin Guy]

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?

[OcTradism]

Volatility is what traders need and are looking for their tradings. Real traders can not trade if there is no volatility on the market. They can trade but they never like such market.

Volatility is not a serious problem for investors who have long term perspective for their investment.

So what does volatility mean for traders and investors? Can it cause fear on them? I guess not, only for real traders and investors. For people who self call they are trading or investing but don't know what they are doing, they have fear always.

[isaac_clarke22]

~

I am assuming aside from those three you mentioned that Bitcoin is global as well.
Many investors around the world could be throwing their money at and many could be dumping as well that's why the price is like a hell of rollercoaster ride.
This is being affected from factors like hype from media's headlines to it.
I guess it would somehow relate to the third point you mentioned though.

[CryptopreneurBrainboss]

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

Let exclude all the obvious well known feature like its finite supply, decentralized nature, more demand than supply available in the market etc that others before me must have written on and go into some simple reason why bitcoin is so volatile. Firstly it's the hottest trend in the industry, everyone and most institute wants to get their hands on some bitcoin holding which is creating more awareness for the currency.

You can't expect all these to be happening and still want the price value of the most talk about asset and currency to not be volatile. We also have the features of the market still been patronize by noobs that are yet to understand how the market works which result to them fomo or fud at every news they read or hear.

[decodx]

Yes, Bitcoin price is extremely volatile. However, if you're looking to invest in the cryptocurrency market, you should be aware that Bitcoin has had one of the best performance records in the stock market history. So, you could potentially lose your money, or make a big profit. That's a big risk, but if you are comfortable with it, it could be a good thing. But more importantly, it could be a good way to learn more about the Bitcoin economy and how to profit from it.

[RealMalatesta]

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)?

I believe it's because of a simple reason - The BTC market is still new and still in propagation phase from one user to another and hence the demand in the market increases day by day. The reason you see why it drops is because there are some investors who invested early in BTC and they have the power to sell some BTC and bring the market down. Some are even playing with this kind of power, they have big amount of coins and they dump, buy at a cheaper price and then again repeat the same. It can go wrong too at times though, if the market doesn't drop as much they expect.

When we talk about stock market, because of the nature of stocks being centralized there is always a track of who holds how much and hence there is not much manipulation that can happen.

Just consider someone bought a pizza for 10000 BTC and I am giving this example just to emphasize how cheap BTC was in past and if someone by chance bought 100k BTC, they can play with the market and hence the big fluctuations and manipulations.