Recently, someone asked me what exactly causes the rise and fall of Bitcoin. Honestly, that’s a good question. I’ve noticed many people only see Bitcoin’s price rising from $15,000 to over $80,000 and find it incredible, but the underlying logic is actually quite clear.

First, you need to understand the core reason for cryptocurrency price fluctuations—supply. There are only 21 million Bitcoins in total, and over 20 million are already in circulation. This scarcity is fundamental. More importantly, starting April 2024, Bitcoin’s daily issuance will be cut in half from 900 to 450 coins, which artificially creates greater scarcity and naturally supports the price.

Next is the change in demand. The wave of 11 spot Bitcoin ETFs launching in early 2024 marked a turning point. Institutional investors entered the market, significantly increased liquidity, and trading became much easier for ordinary people. With so many big institutions backing it, public confidence in digital assets also rose. This is a classic combination of reduced supply and increased demand.

But if you think the only reasons for crypto price movements are these, that’s too simplistic. Market sentiment plays a huge role. When everyone is optimistic, FOMO (fear of missing out) can push prices higher; conversely, when the market is pessimistic, panic selling can trigger declines. I’ve seen many sharp fluctuations caused by policy news, macroeconomic changes, or actions by major institutions.

There’s also a frequently overlooked factor—mining dynamics. Changes in hash rate, fluctuations in mining costs, all can influence market supply expectations. Additionally, Bitcoin’s role as a safe-haven asset during economic instability can also drive its price higher amid global financial turmoil.

When discussing the causes of crypto price swings, technical factors can’t be ignored either. Bitcoin’s security, scalability solutions, privacy improvements—all these impact investor confidence in the long term. Large institutional buying and selling can also cause short-term volatility.

I think the key is to understand that Bitcoin’s price movement doesn’t follow a fixed pattern; it results from multiple interacting factors. Supply, demand, policies, sentiment, macro environment—all are at play simultaneously. So, if you want to understand crypto price fluctuations, you need to consider all these factors together.

Finally, although Bitcoin’s rise from lows to highs has been astonishing, it also means the risks are equally huge. Price volatility can be very intense, so it’s essential to fully understand your risk tolerance before investing. Keep a close eye on market trends, policy changes, mining data, and other factors, and make decisions based on your own situation—that’s the rational approach.