Like most existing digital currencies or cryptocurrencies, Bitcoin is a very volatile cryptocurrency; for example, between November 2017 and December 2017, its price had increased by at least 220 percent; many other instances have shown how volatile Bitcoin value and price have been and can be. But why has bitcoin price and value been so volatile? Well, it’s important to note that upward and downward price fluctuations and volatility of Bitcoin price on cryptocurrency exchanges are determined by many factors. This article discusses 11 factors that have determined and can still determine Bitcoin price volatility around a particular time period.

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11 Factors that Can
Determine Bitcoin
Price Volatility
July 2021
EDITED
BY IHAGH GODWIN

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Motivation & Environment
Presents:
11 Factors that Can Determine
Bitcoin Price Volatility
Copyright Free: You may distribute
without permission, and share with
anybody
Edited by Ihagh G.
MSc (Water Resources & Environmental Eng.),
BSc (Civil Engineering), and 7 years university
teaching experience
Editor, Motivation & Environment
Email: godwinihagh@gmail.com

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11 Factors that Can Determine Bitcoin Price
Volatility
Since Bitcoin was introduced more than a decade ago, its price
has been rapidly rising and frequently associated with high
volatility. Historically speaking, the rapid changes in Bitcoin price
and value have made it consistently volatile.
Like most existing digital currencies or cryptocurrencies, Bitcoin
is a very volatile cryptocurrency. Many past instances have
shown how volatile Bitcoin value and price have been and can be;
one instance for example occurred when, between November
2017 and December 2017, its price had increased by at least 220
percent.
But why has bitcoin price and value been so volatile? Well, the
upward and downward price fluctuations and volatility of Bitcoin
price on cryptocurrency exchanges are determined by many
factors. This article discusses 11 factors that have determined
and can still determine Bitcoin price volatility, and Bitcoin price
and value around a particular time period. Now let’s get right into
it: the 11 factors are as follows:

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1. Search Pressures on Keywords Associated with Bitcoin,
Particularly on Google Searches Made for the Word “bitcoin”
(Hans Bystrom & Dominika Krygier, 2018); this conclusion was
arrived at after correlations, OLS-regressions and VAR-analysis
were used to analyze daily, weekly and monthly data between
2011 and 2017, and examine the link between the volatility in
Bitcoin market and the volatility in other related traditional
markets (gold, currency, and stock market); by using different
loss functions, the research also showed that by studying Google
search activity, predictions on Bitcoin price volatility can
improve. Other research works on “Google search trends and
Wikipedia articles views” (Kristoufek, 2015 and Glaser et al.,
2014), “Twitter sentiment analysis” (Kaminski, 2014, and
Georgoula et al., 2015), and “Online communities reactions”
(Dwyer, 2015, and Kim et al., 2016) support Hans Bystrom and
Dominika Krygier (2018) conclusion that search pressures
(Bitcoin’s attractiveness to people) on keywords associated with
Bitcoin can determine Bitcoin price volatility.
2. Volatility in Dollar (USD) Currency Market (Hans Bystrom &
Dominika Krygier, 2018). The fluctuation in the prices of goods
and services (the Euro/USD exchange rate) can create volatility

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in the USD currency market which can also determine Bitcoin
price volatility: generally, volatility in the USD market can
determine the number of dollars that would be paid to buy a
Bitcoin, and this would subsequently determine Bitcoin price
volatility.
3. Bitcoin Demand (Ciaian, Rajcaniova & D. Kancs, 2016):
Bitcoin demand affects Bitcoin price which, subsequently, can
determine its volatility, depending on how high or low the price
range is on a daily, weekly, monthly, yearly, or longer-term basis.
Contrary to the notion that both supply and demand affect
Bitcoin volatility, Ciaian, Rajcaniova & D. Kancs (2016) and
Kristoufek (2015) noted that, because Bitcoin has a deterministic
supply (21 million Bitcoins), only its demand can determine its
price. Georgoula et al., (2015) employed a VEC model and found
out that in the long run, Bitcoin price—and subsequent
volatility—is positively related to the number of Bitcoins in
circulation. The more that BTC is recognized, the more that
people would want to accept it, buy it, and use it as a means of
payment.
4. Bitcoin Supply and Demand (Sana Guizani and Ines Kahloul
Nafti, 2019); but demand has a more significant impact on

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Bitcoin price volatility and value than supply does because
Bitcoin supply is limited (Ciaian et al., 2016). According to Sana
Guizani and Ines Kahloul Nafti (2019), supply and demand are
the major forces of the market and are also traditional
determinants of the price formation of any financial asset. This
notion contrasts the notion that only Bitcoin demand—as noted
by Ciaian, Rajcaniova & D. Kancs (2016)—can determine Bitcoin
price and subsequent volatility.
5. Changes in Prices of Oil and Gold (Wijk, 2013). Wijk proved
that oil price and Nikkei index had a negative effect on Bitcoin
price; subsequently, this could negatively impact Bitcoin price
volatility and Bitcoin price and value around a certain time
period. On the other hand, Wijk proved that Dow Jones index
had a positive effect on Bitcoin price in both the short and long
term. According to Palombizio & Morris (2012), oil price is one of
the major sources of pressure on costs and demand and may
result in a decrease or an increase in Bitcoin price and Bitcoin
price volatility. Empirical findings in other research works have
shown that there are relationships between changes in prices of
gold and oil, and volatility in prices of cryptocurrencies (Teker D.,
Teker S, & Ozyesil M., 2020).

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6. Difficulty of Mining Bitcoin (Li and Wang, 2017). Li and
Wang suggested that the process of extraction, which depends on
the operation and maintenance of computers, softwares,
electricity, and human resources, incurs costs that influence
Bitcoin price and volatility.
7. Influence of Mass Media. Mass media consists of any
medium or technology used to pass information to mass
audiences; it is a much wider platform than the internet which is
only a part of it. Mass media includes radio, television,
newspapers, magazines, and the internet. From the conclusion
arrived at by Hans Bystrom and Dominika Krygier (2018), it
would be easy to agree that the influence of mass media can
determine Bitcoin Price volatility. Greater media coverage and
acceptance of Bitcoin—which has been the case around the
world—would lead to higher Bitcoin demand, and affect Bitcoin
price volatility.
8. Bitcoin Arbitrage Trading and the activities of Bitcoin
Traders. Bitcoin is traded across many different exchanges, and
traders have different trading skills on Bitcoin arbitrage which
captures slight differences in Bitcoin price across various Bitcoin
exchanges and provides opportunities for a trader to buy Bitcoin

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at the lower price on one exchange and sell it at a higher price on
another exchange. The trading strategies employed by traders
(who intend to take advantage of the price differences between
exchanges) can cause changes in Bitcoin prices and determine
Bitcoin price volatility. If Bitcoin is cheaper on Luno but more
expensive Coinbase, then it’s likely that traders would like to buy
Bitcoin on Luno and sell it on Coinbase; most times, the
leverages and thin volumes on Bitcoin trading exchanges that
involve such activities create sloppy fill prices that result in more
losses than drive Bitcoin price downwards, and make it volatile.
9. Political Decisions taken by Governments. It is well known
that political events and decisions have changed the value and
price of Bitcoin, and determined Bitcoin price volatility. For
example, in the not-too-distant past, the trade war between
China and the USA, and the unstable relationship between Iran
and the USA, has had an impact on the price of Bitcoin and
determined Bitcoin price volatility. Also, governments have been
constantly changing regulations regarding Bitcoins; these
circumstances have caused Bitcoin price fluctuations and made
Bitcoin volatile at certain points in time; for example, in 2017
when China decided to halt the activities on several trading

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platforms, the price of Bitcoin plummeted. In 2018, within 24
hours after various governments in Asia made announcements
concerning expected regulatory changes, there was around a
hundred billion dollar drop in the cryptocurrency market.
10. Increasing Distrust in Fiat or Traditional Currency.
Bitcoin price volatility, especially its rise in the long run, has
been driven to a great extent by an increasing loss in confidence
that people have had in conventional fiat currencies like the
dollar, euro, and pound. The increasing level of distrust and loss
of confidence in many economies have made people put more
trust in Bitcoin and other cryptocurrencies, instead of in
fiat/traditional currencies; this has affected Bitcoin price and
impacted its consistent volatility. Many people have lost complete
trust in their country’s currency and banking system and looked
to Bitcoin as an alternative in which the value of their money can
be stored, maintained, and increased.
11. Bitcoin Security Breaches & Theft. Bitcoin and many
cryptocurrencies have made headlines because the platforms that
stored them were vulnerable to attacks from cybercriminals who
hacked the platforms’ systems, and in certain instances made
them bankrupt: grand thefts occurred and lots of

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cryptocurrencies were stolen; these incidences fluctuated Bitcoin
price and value, and affected Bitcoin price volatility. In addition,
reports about thefts and losses had a greater impact on Bitcoin
price volatility: usually, they raised the value of the remaining
Bitcoin because of the resulting scarcity.