Bitcoin: The mystery of its sudden rise and fall and its far-reaching impact

In today's digital economy, Bitcoin, as an emerging virtual currency, is like a dazzling star, attracting the attention of countless investors and technology enthusiasts. However, the price fluctuations of Bitcoin are like a roller coaster, sometimes soaring and sometimes plummeting, causing many investors to wander between surprise and panic. This price fluctuation not only affects the wealth of investors, but also has a profound impact on the global economy, financial markets and even social psychology. This article will deeply analyze the problem of Bitcoin's surge and plunge and its impact from multiple perspectives.

The price fluctuation of Bitcoin is often closely related to a variety of factors such as market sentiment, policy changes, technological progress, and market supply and demand. First of all, investor sentiment is one of the important factors driving Bitcoin price fluctuations. Many of the market participants in Bitcoin are retail investors, and their investment decisions are often affected by emotions. For example, when the price of Bitcoin soared to nearly $20,000 in 2017, many investors rushed into the market for fear of missing out, causing the price to climb further. However, when the price reached its peak, market sentiment quickly turned to panic, and many people chose to sell, and the price plummeted. This emotional fluctuation not only affects the decision-making of individual investors, but also poses a threat to the stability of the entire market.

Technological progress is another key factor affecting Bitcoin price fluctuations. The continuous development of blockchain technology, the underlying technology of Bitcoin, has attracted more and more investors' attention. For example, the launch of the Lightning Network aims to solve the problems of slow Bitcoin transactions and high handling fees, making Bitcoin's use scenarios more extensive, thereby increasing its value. However, technological progress is also accompanied by uncertainty. New technical vulnerabilities or security issues may cause investors' confidence in Bitcoin to decline, which in turn may cause sharp price fluctuations.

Market supply and demand is also an important reason for Bitcoin price fluctuations. The total amount of Bitcoin is limited, only 21 million pieces. This scarcity makes Bitcoin prone to drastic price fluctuations when there is an imbalance between supply and demand. When market demand increases and investors rush in, prices will rise rapidly; when demand decreases and investors choose to sell, prices will fall rapidly. This change in supply and demand can cause drastic price fluctuations in a short period of time, bringing huge risks to investors.

The ups and downs of Bitcoin prices not only affect the wealth of investors, but also have a profound impact on the global economy. First, as the price of Bitcoin rises, more and more people begin to pay attention to and invest in this virtual currency, which promotes the development of the digital economy. The rise of Bitcoin has led to the rapid development of many related industries such as digital wallets, exchanges, and blockchain technology services, creating a large number of jobs and promoting economic growth. However, when the price of Bitcoin plummets, investors' confidence is hit, and their willingness to consume and invest declines, which may have a negative impact on economic growth.

Secondly, the price volatility of Bitcoin also poses a challenge to traditional financial markets. With the rise of digital currencies such as Bitcoin, more and more investors regard it as an investment tool, and traditional financial institutions have to re-examine their investment portfolios and risk management strategies. For example, during the surge in Bitcoin prices, many investors regarded it as a safe-haven asset, resulting in a decline in demand for traditional safe-haven assets such as gold. Conversely, when Bitcoin prices plummet, investors may turn to traditional assets, causing drastic market fluctuations. This change not only affects the stability of the financial market, but also poses new challenges to regulators.

In addition, the price fluctuations of Bitcoin also have an impact on social psychology. When the price of Bitcoin soars, many people are full of hope for the future and even have a "dream of getting rich". This psychological state may cause some people to blindly follow the trend and ignore risks. However, when the price plummets, many people will fall into panic, and even affect their daily life and mental health. Such social psychological fluctuations reflect the irrational characteristics of the Bitcoin market. Investors' performance in the face of sharp rises and falls is often not based on rational analysis, but the result of emotion.

When facing the sharp rise and fall of Bitcoin prices, investors should remain rational and recognize the complex factors behind such fluctuations. On the one hand, investors can better grasp market opportunities by understanding the fundamentals of Bitcoin, market dynamics and policy changes; on the other hand, rationally allocating assets and formulating scientific investment strategies are also important means to deal with price fluctuations. For example, investors can consider investing part of their funds in high-risk assets such as Bitcoin, while maintaining a certain proportion of traditional assets to reduce the risk of the overall investment portfolio. In addition, regularly evaluating the performance of the investment portfolio and adjusting strategies in a timely manner are also important methods to deal with market fluctuations.

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.

Since 2013, the price of Bitcoin has risen from $13 at the beginning of the year to more than $1,000 at the end of the year, and its increase can be said to have reached more than 60 times. In fact, this is all due to the global Bitcoin craze. Chinese aunts have even turned from the gold market to the Bitcoin market, so the Chinese demand for Bitcoin has risen sharply since October 2013. However, on the other hand, the country lacks policy guidance and relevant regulatory laws and regulations for Bitcoin, so its enthusiastic investment sentiment in Bitcoin has not been effectively curbed. It is precisely because of the high profits of Bitcoin that many people take risks, so it is not surprising that Bitcoin has skyrocketed and plummeted. If you want to learn more about the surge and plummet of Bitcoin, you might as well take a look at the analysis of the problems and impacts of the surge and plummet of Bitcoin by the editor of the currency circle.
 Analysis of the problems and impacts of Bitcoin's sharp rise and fall
Looking back, the last bull market of Bitcoin was in 2017. From $1,000 at the beginning of 2017, it rose 18 times to $18,000 in 12 months. Earlier, Bitcoin’s price broke through $1 on February 18, 2011, and reached $100 on May 3, 2013. The 100-fold increase took only 27 months. In comparison, the 5-fold increase in 4 months is not too remarkable in the 11-year history of Bitcoin’s surge.
Some people will definitely disagree, believing that the difficulty of Bitcoin rising from $1 to $100 (an increase of $99) is definitely less than the difficulty of rising from $50,000 to $57,000 (an increase of $7,000). This view of measuring the difficulty of rise and fall by absolute increase can only be used for valuation in the traditional monetary system.
So far, no one can clearly explain the value of Bitcoin, and there is no universally recognized pricing basis. In the end, the price fluctuation can only be attributed to the confidence of buyers and the public sentiment, which is precisely the most illusory and difficult to measure. Therefore, the price of Bitcoin is like a boat without an anchor in the sea, with huge fluctuations up and down with strong winds and waves. It can fall to 4,000 in a year, and it can also rebound to 57,000.
From 2008 to 2020, there are exactly three four-year periods, which we call the three halving years. 2012, 2016, and 2020. The most recent halving was in May last year. And what we can understand is that the year after each halving will usher in a super bull market in the cryptocurrency circle.
From a financial perspective, large investment institutions represented by Grayscale have entered the market and started to make plans. You can say that the fortune-telling analysts in the currency circle are fools without a pattern, or that the currency circle enthusiasts are ignorant people who have been brainwashed and are frogs in the well. But you have to know that the people in the investment institutions are not fools, they are elites from the financial circle, and their data departments, market value management departments, etc. are all composed of elites.
What they approve of will definitely go up. As long as they buy, it means a huge influx of funds. What will the influx of funds bring? Of course, it will cause a crazy rise in prices. This year, we know that due to the entry of investment institutions such as Grayscale, the price has steadily risen from 3,800 US dollars at the beginning of the year to more than 50,000 US dollars now. There is a profit margin of nearly ten times, but this is just the beginning, not the end.
 Summary of factors affecting Bitcoin
There are many factors that affect the price of Bitcoin: such as mining computing power, investment demand, etc., which play different roles in different periods, but one thing is certain, the factors currently affecting Bitcoin are public sentiment, or the panic index, and other basic factors have temporarily become secondary factors.
The myth of Bitcoin’s safe-haven function has been completely shattered this time. In fact, after the emergence and popularization of stablecoins, the few safe-haven functions that Bitcoin still had were completely replaced.
This will have a profound impact on the future positioning of Bitcoin. Before this, some people bought Bitcoin for investment and speculation, while others bought Bitcoin for hedging and circulation in times of crisis. After this bloody lesson, no one in the market should still fantasize about Bitcoin as a safe-haven asset, which will have a negative impact on long-term demand.
Looking back at the past market of Bitcoin, it is very appropriate to describe it as a "roller coaster". According to statistics, in the past year, there were 8 months with an average monthly increase or decrease of more than 10%. In December 2017, Bitcoin hit a record of $19,783, and then the price fell all the way, almost falling below $3,000, a sharp drop of 80% in one year.
Since October last year, Bitcoin has ushered in a bull market under the pursuit of some overseas institutional investors, rising from $10,000 to a maximum of $40,000. During this process, more and more small and medium-sized investors began to follow suit and use loans and derivatives transactions to leverage the currency. This phenomenon has intensified, especially after the price of Bitcoin exceeded $20,000 in late December last year.
"From historical experience, a bubble cycle can be divided into five stages: gestation, prosperity, excitement, distress and recession. The recent market crash and subsequent rebound are just one of the typical manifestations of the distress stage in the bubble cycle," said William Li.
Bitcoin is a high-risk asset with huge price fluctuations. Skyrocketing and plummeting prices are not accidental but the norm.
The above content is the analysis of the problems and impacts of Bitcoin's surge and plunge by the editor of the currency circle. In fact, the rise of risk aversion will also become a very important factor affecting Bitcoin prices and market conditions. We know that since the outbreak of the epidemic, the global economy has been sluggish, and major central banks around the world have implemented loose monetary policies, pushing up market inflation expectations. However, with the launch of vaccines across the country, the global economic recovery has been promoted. In such an environment, major central banks around the world may gradually withdraw from the existing loose policies. If you want to invest in Bitcoin, you must be cautious enough and pay attention to guard against the risks.

Policy changes are also an important factor affecting Bitcoin price fluctuations. Governments around the world have different regulatory attitudes towards Bitcoin, and policy uncertainty often makes the market full of volatility. For example, in 2021, the Chinese government strengthened its supervision of Bitcoin mining, causing many miners to withdraw from the market, directly triggering sharp fluctuations in Bitcoin prices. At the same time, U.S. regulatory policies are also constantly changing, affecting investor confidence and market liquidity. This policy volatility keeps the Bitcoin market in an unstable state.

In general, the surge and plunge of Bitcoin is a complex phenomenon involving multiple factors such as market sentiment, policy changes, technological progress, and supply and demand. Although this volatility brings risks to investors, it also provides impetus for the development of the digital economy. In the future, as the Bitcoin market continues to mature, investors should pay more attention to the fundamentals of the market and maintain a rational investment mentality to cope with the ever-changing market environment. In this era full of opportunities and challenges, only by continuous learning and adaptation can we remain invincible in the world of Bitcoin.