Bitcoin was once in the limelight, but it has recently suffered a sharp decline, which makes people wonder: Why did Bitcoin fall? This is not a simple fluctuation of numbers, but a complex phenomenon with many reasons behind it. Let's dig deeper and uncover the real reason for the Bitcoin crash.

Market sentiment fluctuations

The surge and plunge of Bitcoin prices are often affected by market sentiment. The fluctuation of investor sentiment will directly affect the fluctuation of Bitcoin prices. For example, when the market is in a panic, investors will sell Bitcoin, causing the price to fall. The recent Bitcoin crash is partly due to the fluctuation of market sentiment.

Regulatory policy impact

Changes in regulatory policies are also one of the important reasons for Bitcoin price fluctuations. Governments of various countries continue to adjust their regulatory policies on cryptocurrencies, and some countries have strengthened restrictions and supervision on Bitcoin, which directly affects the price trend of Bitcoin. The Bitcoin crash is often inseparable from changes in regulatory policies.

Market supply and demand relationship

The supply and demand relationship is an important factor affecting the price fluctuations of any commodity. The supply of Bitcoin is limited, while the demand has been increasing, which leads to fluctuations in Bitcoin prices. When market demand decreases, Bitcoin prices will fall. Behind the Bitcoin crash, changes in supply and demand are also inseparable.

Investor psychological expectations

Investors' psychological expectations will also directly affect the fluctuation of Bitcoin prices. Some investors will decide whether to buy or sell Bitcoin based on their own psychological expectations, and this psychological expectation often amplifies price fluctuations. The plunge of Bitcoin is also inextricably linked to investors' psychological expectations.

Technical factors

Technical factors are also one of the important reasons for Bitcoin price fluctuations. Bitcoin exchanges encounter hacker attacks, technical loopholes and other problems, which will directly affect the fluctuation of Bitcoin prices. The instability of technical factors is also one of the important factors for the plunge of Bitcoin.

Conclusion

The plunge of Bitcoin is not caused by a single reason, but the result of the combined effect of multiple factors. Market sentiment, regulatory policies, supply and demand relationships, investor psychological expectations and technical factors together constitute a complex network of Bitcoin price fluctuations. Understanding the reasons behind these will help investors better grasp the trend of Bitcoin prices, avoid risks, and achieve more stable investment returns. In future investments, it is necessary to act cautiously and invest rationally to be able to win in the market fluctuations. I hope that every investor will overcome difficulties and get rich returns in this world of digital currency.

The four most famous international exchanges:

Binance INTL	OKX INTL	Gate.io INTL	Huobi INTL
China Line　APP DL	China Line　APP DL	China Line　APP DL	China Line　APP DL

Note: The above exchange logo is the official website registration link, and the text is the APP download link.

Bitcoin started 2022 with almost double the value it had in January 2021, a year in which cryptocurrencies exploded in mainstream interest and curiosity. But before the end of the first month of 2022, Bitcoin had lost almost all of its gains from the previous year, falling to the $33,000 range in January. As more and more everyday investors wonder how cryptocurrencies fit into their portfolios, financial advisors find themselves incorporating cryptocurrencies into their guidance. Compared with other cryptocurrencies, Bitcoin has a wider track record, and many investors want to know why Bitcoin has fallen? Let the editor of the currency circle analyze the reasons for Bitcoin's decline for everyone.

 Why did Bitcoin fall?

Looking back at the price changes in recent years, Wang Peng, a researcher at the Beijing Academy of Social Sciences and a researcher at the Center for Intelligent Social Governance of Renmin University of China, told the Beijing Business Daily reporter that the surge and plunge in the price of virtual currencies had long been expected. "Especially for virtual currencies that have no underlying assets and no application scenarios to support them, the risk of price fluctuations will be greater."

From the perspective of commodity economics, Wang Peng further explained that the price of commodities is determined by value, and supply and demand affect prices. Bitcoin transactions are over-the-counter transactions similar to financial derivatives, lacking physical business support. Its price increase relies on "consensus", which itself does not conform to economic laws. In addition, the recent market fluctuations and global instability will also hit the confidence of currency traders and trigger selling, which will cause the overall decline in currency prices.

In addition, Wang Peng further analyzed two reasons for the cliff-like decline of Bitcoin, Ethereum and other currencies. One is that the prices of these virtual currencies themselves are inflated.

The second is the impact of changes in relevant international policies and environment. For example, the conflict between Russia and Ukraine, the rise in global energy prices, and the expectation of further interest rate hikes after the release of the US CPI index will affect the confidence of the virtual currency market to a certain extent.

On the news side, the US August CPI data that the market has been looking forward to was released, which was higher than the expected 8.1%. After the inflation data was released, US stock index futures plunged, Nasdaq futures quickly fell by more than 2%, Dow futures and S&P 500 futures fell by 1.1% and 1.5% respectively. Soon, the Federal Reserve will hold its September interest rate meeting, and the latest August CPI report will be the last major data released before the meeting. The market generally expects policymakers to raise interest rates by 75 basis points for the third consecutive time at the next meeting.

 Impact of Bitcoin's decline

This sudden plunge in the price of virtual currency also caught many coin holders off guard. Under the plummeting price, many coin holders who opened leveraged contracts were hit hard. Judging from the situation of liquidation, the loss-making group is more bullish on the market.

According to data from the currency market website Feixiaohao, as of 11:00 on September 14, a total of 47,933 people had their positions liquidated in the last 24 hours, with a liquidation amount of 1.389 billion yuan. And this data is still increasing. As of 15:53 in the afternoon of the same day, there were still 47,810 people whose positions were liquidated, and 1.373 billion yuan of funds were "vanished into thin air".

At present, the so-called contract trading in the currency circle, also known as futures trading, is a model of forward trading of trading products. One is that it can be both long and short, and can make profits in both directions; the other is that it can be leveraged to make a small profit with a big investment. Through contract trading and hundreds or even thousands of times of leverage launched by exchanges, the already volatile currency market has become even more dangerous and crazy.

This part of the people who have been liquidated still has a strong speculative attribute. Most of them hold the mentality of getting rich overnight. Through over-the-counter financing and various leverage tools, they want to take a chance and get higher returns in a short period of time. But it should be noted that once the wrong bet is made, and such a sharp rise and fall occurs again, the liquidated person will lose a lot. Such a high amount of liquidation also reflects the lack of awareness of risks among such investors.

The content above is the specific analysis of the question of why Bitcoin fell by the editor of the currency circle. Bitcoin and other cryptocurrencies such as Ethereum are actually an asset, not a currency. The value mainly comes from the valuation of each cryptocurrency by market participants, rather than being supported by the government or linked to the value of commodities such as gold. There are many reasons why Bitcoin attracts investors: it is not managed by a central bank and is a decentralized form of currency. It is a completely digital way of storing value. It allows for secure and anonymous transactions. It is an alternative asset with some degree of novelty. The value of cryptocurrencies can fluctuate violently in a very short period of time, which means that they are more speculative as investments.