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A volatile currency like Bitcoin has suffered a sudden decline for several reasons. In the first place, fear has grown among investors due to regulatory clampdowns in some major economies such as US, China or EU which resulted in sell-off panic. Additionally, negative reports and proclamations including hacking incidents on exchanges or rational individuals proclaiming doubts on what bitcoin is worth may prompt any one of us to go for panic selling. The mechanics of the market also come at play here; the price of Bitcoin is very unstable and subject to speculation that might lead to dramatic changes in prices. Finally, macroeconomic determinants can be responsible for lower demand by people and hence a decrease in its price. Interest rate fluctuations, anxiety about inflation or change of overall risk appetite by investors are examples of these determinants.
ical changes in the way a cryptocurrency operates can trigger sudden decreases in price. For example, Bitcoin’s reputation as a payment method at risk following the revelation of the block-sizing crisis in 2010 and its consequent transition to Segregated Witness (SegWit) is an indication that technical factors can influence the price of that digital currency.
Changes in Supply and Demand: Different factors including media reports, social networks and worldwide events influence this cryptocurrency’s demand and supply at any point in time. The more users there are willing to pay for this currency, the more likely its price will increase.
Futures Market Activities: Activities like purchasing or selling derivative contracts of cryptocurrencies influence their current price when compared to anticipated prices based on market conditions.
Media Speculation: The media might play an important role in influencing Bitcoin fluctuations by promoting negative stories about it which make people sell it or cause panic buying because they fear losing out (Higgins).
