What Causes Bitcoin Price Fluctuations (Bitcoin Price Volatility and Its Influencing Factors)

What causes Bitcoin price fluctuations Editor’s note: This article is from Cointelegraph China (ID: CointelegraphChina) and is authorized to be reproduced by Odaily Star Daily.

One of the biggest reasons for the recent fluctuations in Bitcoin prices is how much influence people have on the price of Bitcoin and whether it will change over time. This may become a major factor affecting future Bitcoin transactions.

According to data from the cryptocurrency analysis company Skew, as of August 4th, Bitcoin rose from $30,000 to $70,000 in the past week, an increase of 17%; Ethereum also briefly rose by over 50% to reach a historical high of around $20,000, but then fell below $60,000.

These trends indicate that Bitcoin is attracting more and more attention because its value is skyrocketing, and there is still a large number of people who consider it a scam.

Bitcoin and Ether are both tokenized projects supported by decentralized financial service providers. They protect their digital wallets, payment networks, or other blockchain-based applications through the use of blockchain technology, enabling instant settlements and reducing fraud risks. Additionally, due to the fully decentralized nature of smart contract platforms, they can also be used as a medium of exchange or a store of value.

Although Bitcoin’s price volatility is high, some researchers have pointed out the correlation with volatility—for example, the increase in Bitcoin on-chain activities leading to significant price fluctuations. Despite the many uncertainties and instabilities, Bitcoin seems to bring many benefits. For example, it is certain that the Bitcoin blockchain is often used to verify transactions, and whenever a block contains a large amount of data, significant fees are generated.

However, the difference is not always due to market sentiment; sometimes extreme and drastic markets occur because traders tend to hold less or something that cannot be sold—or they hope to buy more BTC instead of putting it into an exchange. In fact, this situation is common: Bitcoin’s price may quickly rise, as it did in 2017, until this year when it began to fall. If investors are not aware of this, they will quickly move to another exchange to gain more profit.

Since 2018, the price of Bitcoin has been declining. Nevertheless, the industry still maintains positive momentum and may even continue to rise.

“We are seeing now that the growth of the Bitcoin and other cryptocurrency markets is much faster than most traditional asset classes.”

Bitcoin price volatility and its influencing factors

According to CoinDesk, in the past week, Bitcoin’s price volatility reached an all-time high and reached about $20,000 on Thursday. Despite the significant drop in Bitcoin’s price, it has risen nearly 50% since April 1. According to data from CoinMarketCap, as of the time of writing, the trading price of Bitcoin is $28,200 per coin, an increase of over 25% from $26,600 at the beginning of June, which may indicate a significant change in market sentiment.

In addition, the price movement of Bitcoin differs from traditional markets in that it is associated with assets such as stocks and foreign exchange; instead, its main feature is that its attractiveness as a store of value exceeds other currencies or commodities. As demand for Bitcoin increases among investors and its ability to be used as a means of payment, medium of exchange, and investment tool strengthens, this demand may expand with the development of cryptocurrency technology.

It is worth noting that the Bitcoin network processes over one million transactions per day, more than 10 times the growth in December 2017. For much of 2018, few transactions occurred, and most Bitcoin activity was concentrated in a few regions—Asia, Europe, the Middle East, and Africa.