What causes the ups and downs in bitcoin prices?

So, bitcoin is pretty unique with its cap of 21 million coins. This makes me wonder, if that supply is fixed, what really drives the price swings? Is there some algorithm that keeps bitcoin in the spotlight? I also thought about how these price fluctuations might actually be a good thing. It seems like each time the price dips, it often bounces back even higher than before. Is this volatility built into bitcoin to help it grow, or is it just a way to balance it against fiat currencies?

Price of bitcoin is equals to marketcap divided by circulating supply. Price = marketcap ÷ circulating supply. Marketcap is proportional to demand. Which means increasing demand means increasing marketcap and decreasing demand means decreasing marketcap. As people buy, can you see from the formula that the price will increase? Also as people sell, the price will fall.

BTC was not programmed with the price moves in mind, imo, it's role wasn't in that.. but in giving people freedom and custody over the value they've got already on hands. So, no, it's the demand and adoption that drives the price. And many other smaller factors too.

Firstly, the fluctuations in price isn’t programmed...just as _act_ has explained, this fluctuations happens because of the demand and supply mechanism of the network. This is the reason why news sentiment have effect on the market, either positively or negatively…it totally depends on how much people buy or sell.

and that is linked to the Bitcoin halving event which takes affect in the market between 12 and 18 months after, which in turn creates what is commonly referred to as the 4 year cycle. That is kind of known, its argued whether the 4 year cycle is over and/of if the effects of it are as strong as previously. So the market is reacting to the supply of Bitcoin, and also human sentiment which is affected or influenced by everyday events, created by us either deliberately created to move the market or in world geopolitical news. Basically almost everything that happens could potentially influence people to buy or sell or not. Its organic, not predetermined.

i am glad that the sentiment has less influence over the price than the processes inside btc themselves. and with its cap only becoming bigger by each cycle passing, volatility becomes less and less of an issue.

The fluctuation of Bitcoin is caused by the same thing that determines the price of almost every other product in the real world: demand and supply.[/b] The problem is you're looking at Bitcoin from a perspective that it is different from every other product. Look at it from the basic economic principles. When the demand for a product is high, and the supply remains fixed, the price of that product will increase. In the same way, if the demand for a product reduces while the supply remains fixed, the price of that product will drop. Every other factor we can talk about is a factor that affects demand and supply,, like political instability, economic instability, sky-high energy prices, rumours, speculations, and so on. Bitcoin was ot programmed to always flctuates. It fluctuates based on how much demand it has at the moment.

Bitcoin is a global asset, there are buyers and sellers across different region. So, when there is good news, everyone tend to buy available Bitcoin on the order book, each buyers take whatever price the sellers put on the order book, this way the price continues to increase because the orders price arrange in sequence as the orders are taking, you can see Bitcoin price at $70k before the news and in the next 5 minutes, the price will be at $70500, that's because the buyers has bought the available order hence causing the price fluctuations under the 5 minutes. Everything happened naturally, there is no program anywhere, however, some traders use bot for buying and selling. This is to help them buy and sell when they are not around and they tend to behave like human trading. Although, some exchanges don't like when traders use bot to buy and sell because of fake volume and wash trading. Just see Bitcoin fluctuations like the way Gold and other traditional assets prices move around.

You have raised a very valid question. The supply of bitcoin is fixed at 21million, people expect that it should be stable just like fiat whose supply is not fixed, yet has some degree of stability more than bitcoin. Well it is different from bitcoin and the fluctuation of fiat moves in the negative direction which eventually leads to the devaluation of fiat over time. The price of bitcoin is determined by the market, I.e the activities of buyers and sellers. When more people buy bitcoin, the price increases, and when people rush to sell, maybe out of panic, the price of bitcoin drops. These actions which also affect bitcoins price most times are out of emotions and reactions to news, regulations, panic, fear and greed. Oftentimes, after every cycle that witnessed massive sells and consequently dips, the price of bitcoin often bounces back and even higher. That is because, after weak hands must have sold out their bitcoins, and few investors accumulated bitcoins, the supply of bitcoins with exchanges must have reduced also. After that period of panic, a new waive of demand surfaces again. Obviously from those weak hands who sold in panic and others who are adopting bitcoin newly. The more the demand, the higher the price.

The fluctuation is not programmed into it, it's a simple supply and demand thing, where the price goes up if the demand is high, and it goes down if the demand gets low, which means that if more people are looking to buy Bitcoin, the price starts going up because people will keep bidding higher so that they can buy as quickly as possible. Similarly, when more people are willing to sell, they will keep adding their sell orders lower from the current market price, and this keeps pushing the price down. This happens because the supply is limited, so an increment or decrement in the demand brings high volatility. I don't know where you got this concept of Bitcoin's fluctuation creating balance betwen fiat and crypto, because it has nothing to do with fiat at all. It's true that fluctuation has been a booster for Bitcoin's overall growth because people started taking interest in Bitcoin after they realized that its value fluctuates, and they saw an opportunity to make money, and this kept going, people kept telling other people, and with that going on for years, Bitcoin has reached $126k eventually because of the demand increasing over time.

from the question you have asked, we can even see the answer you seek sitting right there written by you. The fixed supply of bitcoin and the basic effect of increasing or decreasing buys and sell only suggest that there is no way bitcoin can exist without being a volatile asset. An increase in buys means that there are fewer available bitcoin in circulation and it will naturally lead to bitcoin price skyrocketing. if the reverse is the case, it is just normal that bitcoin price will respond in a reverse way. By saying the fluctuation is programmed keeps bitcoin at similar place with most Ponzi scheme and if that is the case, investors would have opted out long time ago.

I think you have never encountered speculative assets in the past. If so, please do so, you can find them among stocks, commodities and forex. These asset classes will change their price as per the market demand and supply. Since the demand becoming high means the asset is becoming more costly in terms of its fiat value, its price will increase and vice-versa. So the market demand is what is responsible. The supply is limited and thus you have your answer. Dont think that certain people are controlling the price. It is possible to move the market towards buying or selling through huge amount of bitcoin being bought or sold, but that is true for every speculative asset.

In most years, Bitcoin outperforms other assets. ROI chart. Bitcoin Returns vs. Major Asset Classes Bitcoin sharpe ratio vs major assets. The authors of two articles did not update theirs after a long time but hopefully they will update figures for two years 2024 and 2025.

I think the key drivers - as usual for prices . . . - are supply and demand. For sure the halving mechanism was basically a genius adoption boost because it ensured over time the supply drops and thus structurally price would go up. Provided demand stays constant. But there comes the crux of the topic: demand is not constant. Mainly due to human psychology. Price rises - especially rapid ones - create attention and draw in more buyers, and especially later on speculators. So it massively overshoots and then crashes. So back to start, and then the structural supply shortening plus hopefully higher base demand due to a grown network (#network effects) lead to the floor and we start all over. Two things changed: the halvening is not that material anymore, so the supply reduction cannot easily drive up prices. And we have now institutional players in the market who can use classic financial engineering to influence the price beyond even owning any Bitcoin, especially via the ETFs and option markets (incl short-selling). So yeah, plenty of reasons for volatility, or how you call it fluctuations.

I don't know where he get that idea about being programmed since Bitcoin actually don't move that way base on what he said. Also all a Each movement of those speculative asset depends on supply and demand. So if more people buying automatically the price would eventually rise and if more people dump there's a decline will happen, this is the basic thing we can explain on why those situation happening. Also those moves will also depends if there's either positive or negative news that will come out which cause those movements. Maybe he believe to much on those conspiracy and other exaggerated stories told to him that's why he assume that those what he said is really happening.

It is not regulated by government otherwise there would not have been soo much fluctuations. Most of it is determined by supply and demand but sometimes it is also done artificially by whales.

The main factor is that the demand and supply determine the price, it has a big effect. Because BTC trades 24/7 in different regions or globally, small changes in demand can lead to sizable price moves, especially during periods of low liquidity.  I think OP has confusion about asking if Bitcoin has been programmed.  But the fact is that, no one controls it, and it's even hard to manipulate the price. Another reason could have a minimal effect. It could be these. Geopolitical issuesRegulatory newsFUDGovernment rules

Effects can be huge while the reason is small because the market and participants in it response very emotionally. When they lose control of their emotion, make bad actions, the market with leverages, liquidations, Cascade effects can make things escalating and becoming worse very quickly. Sometimes the market can move by reacting very seriously with a news that looks to be very small and likely has no effects but the market does not work with any logic. Market makers manipulate the market and the game, so logic actually belongs to the market markers, not how the majority of people in the market think about it. Fud has many types and by understanding basics about FUD, people can control their emotion and actions better in the future. https://endthefud.org/

Have you heard about what humans here call The price is determined by orders on exchanges and are not affected when coins move onchain. You can check out the thread here, I asked something similar years ago https://bitcointalk.org/index.php?topic=5512836.msg64630600#msg64630600 Demand isn't constant It changes as a result of different things like Geopolitical crisis, Monetary policy even politics Market react fast to news in the short term while the rise is as a result of speculation /belief that if Bitcoin falls it would rise.

I don't know how exactly you don't know what is responsible for bitcoin volatility, that the correct word and not fluctuatipn as you called it per say, however the demand and supply chain is responsible for everything, bitcoin or any other asset. now for bitcoin their is an event that in its nature is called the bear market and that time is when the demand goes down hence the price drops down, people sell out their bitcoin than hold it or tries to move their asset to and asset to hold it's value for the main time untill the bear market is over and then when it's over the demand to hold bitcoin so it doubles and gives you profit makes the price high again. thanks just the ELI5 explanation in my opinion.