What Makes Bitcoin Go Up and Down? A Beginner’s Guide to BTC Volatility

When Bitcoin's price surges, everyone wants to know why. The answers can vary considerably, as various factors influence Bitcoin. Understanding these variables and Bitcoin indicators can help investors make informed decisions, especially in a market notorious for volatility. This guide will explore what makes Bitcoin go up and how these insights can empower your investment strategy.

Bitcoin Magazine Pro’s Bitcoin analysis offers valuable insights to help you achieve your investing goals. The tool breaks down Bitcoin’s price movements to help you understand the factors driving the current market. 

Bitcoin’s Poor Start to Bullish October Continues

Bitcoin's price movement in early October contrasts sharply with its historical trend of "Uptober," a seasonally bullish trend that has characterized the month for several years. Bitcoin's price has failed to break the $70,000 resistance level and dropped to as low as $58,000.

As of writing, Bitcoin is changing hands for $61,000, down 5.7% since the start of October. Following the asset's recent dip, over $144 million in bullish positions has been liquidated in recent days. 

The October Effect: What’s the History?

October has been Bitcoin’s most bullish month over the years, with gains in this month every year but 2013 and 2014. Since 2015, Bitcoin has averaged gains of over 22% in October, with a median return of 15%. In 2020, the asset jumped nearly 30% in October, while in 2021, it gained around 40%. Last year, Bitcoin surged nearly 30% in October as well.

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Bitcoin at Risk of Further Decline if It Breaks Below the Key Support Level

Support levels act like a price floor. When Bitcoin drops to a support level, buyers usually step in and push the price back up, preventing it from declining further. If Bitcoin breaks below a support level, it signals that the market has lost confidence in that price and could be in for a further decline. For this reason, traders closely watch support levels, as they can help inform short-term price predictions.

Bitcoin’s key support level is its 200-day exponential moving average (EMA), just above $59,800. If the average can withstand the recent selling pressure, it could allow Bitcoin to reverse its current downtrend. If Bitcoin closes below the 200-day EMA, it could trigger a further drop to around $55,000, according to estimates from QCP Capital. 

What Could Trigger a Decline Below Bitcoin’s Key Support Level?

Bitcoin has recently exhibited a connection to traditional market assets as global economic uncertainty has risen. As such, it is possible that upcoming economic events or signals could impact Bitcoin’s price.

Bitcoin has already declined sharply in response to rising tensions in the conflict and found support around $60,000. Continued escalation in this situation could trigger further declines in Bitcoin’s price. 

Market Signals and Expert Predictions 

While Bitcoin is highly correlated to the traditional market, a recent report from BlackRock shows that the asset has actually outperformed Gold during times of geopolitical turmoil. On-chain data from CryptoQuant suggests that Bitcoin whales are not looking to sell anytime soon.

These factors and the current support level could help BTC weather the storm if traditional markets react negatively to upcoming economic signals. 

What Makes Bitcoin Go Up or Crash Down?

Various factors influence Bitcoin's price, both internal and external. Internal factors include supply and demand, halving events, and adoption rates. External factors include regulatory news, macroeconomic factors, and technological developments. 

Internal Factors: Supply and Demand, Halving Events, and Adoption Rates

Bitcoin's internal supply and demand dynamics are fundamental to its price. Like any other asset, prices fall when the supply outstrips demand; when demand outstrips supply, prices rise. 

Bitcoin's Limited Supply and Price Volatility

Bitcoin is unique because its supply is limited. There will only ever be 21 million Bitcoin. This fixed supply means that events that affect Bitcoin demand and its circulating supply can lead to dramatic price fluctuations. Halving events are one such occurrence. 

Bitcoin Halving Events

Bitcoin undergoes a halving roughly every four years, or more precisely, every 210,000 blocks mined. During a halving, miners' reward for validating transactions on the Bitcoin network is cut in half. This event reduces the rate at which new Bitcoin enters circulation by 50%. 

Adoption and Market Shocks

The most recent halving occurred in May 2020; the next is expected to occur in 2024. Historically, Bitcoin’s halving events have been followed by massive price increases. Adoption rates also impact Bitcoin’s price. As Bitcoin becomes more widely accepted by businesses and integrated into traditional finance, the price may see less volatility and respond to positive and negative market shocks with improved resilience. 

External Factors: Regulation, Macroeconomic Trends, and Technological Developments

Bitcoin’s price does not operate in a vacuum; it is also influenced by external market forces. One of the most significant external factors is regulatory developments. News that a government wants to regulate Bitcoin or has imposed new rules on its use can immediately affect Bitcoin’s price. In June 2021, for example, Bitcoin’s price plunged by nearly 50% just weeks after China announced a crackdown on mining operations. 

Developments in traditional finance can also impact Bitcoin’s price. As institutional investors have begun to allocate capital to Bitcoin, traditional market trends can influence the price. For instance, in 2020, Bitcoin’s price spiked during the coronavirus pandemic as liquidity from the traditional markets began to flow. 

The Role of Social Media in Bitcoin’s Price Volatility

Social media also influence Bitcoin’s price. As retail investors have begun to pour money into the space, they have become increasingly sensitive to the opinions of prominent figures in the space. For example, the price surged when Elon Musk tweeted about Bitcoin in early 2021. It plummeted when he expressed concerns about the asset’s environmental impact weeks later.

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How Do I Know if Bitcoin Is Going to Go Up or Down?

Bitcoin price predictions can cover a wide span and long time range, but understanding Bitcoin’s ups and downs helps make sense of price moves when investing for the long run. It’s helpful to take a step back and look at the big picture to get a sense of long-term direction. Longer time frames help reduce the noisy signals of daily gyrations. 

What Is a Bitcoin Price Chart? 

A Bitcoin chart is a visual representation of Bitcoin’s historical price that shows price patterns that traders can use to identify Bitcoin trading opportunities. It has a horizontal and vertical axis that shows the corresponding timeframe and price of the digital asset. Bitcoin price movements can be discerned by examining Bitcoin charts with several timeframes, from:

• Minutes
• Hours
• Days
• Weeks
• Months
• Years

Traders and analysts use Bitcoin charts to identify price trends to capitalize on. 

How to Read Bitcoin Price Charts

Learning to read Bitcoin charts is essential for anyone looking to trade the digital currency. To study price movements or trends from a Bitcoin chart, you must first understand the different types of charts. The three most common charts traders use are line charts, bar charts, and candlestick charts. 

1. Line Chart

A line chart is a visual representation of an asset’s historical price activity depicted by a continuous line that shows the asset’s closing price. In this chart:

• The horizontal (x) axis is the time scale
• The vertical (y) axis shows the price

In a line chart, you can deduce the price of Bitcoin by linking a data point to the (x) axis in a straight line and the date by linking a data point to the (y) axis. Each point in the line traces the daily (or weekly or monthly) closing price of Bitcoin. 

2. Bar Chart

A bar chart, indicated by its vertical length, is useful in tracking an asset’s daily price fluctuations. The horizontal lines show the daily opening and closing Bitcoin prices. A bar chart goes further than a line chart, showing price fluctuations the range of price movements, and opening and closing prices.

3. Candlestick Chart

The most popular Bitcoin chart out there is a candlestick chart. A candlestick chart uses candles to illustrate the price movement of Bitcoin within a specific time frame. For instance, if a Bitcoin chart is set to a 4-hour interval, then each candlestick denotes 4 hours of trading. 

• A candlestick is composed of a body and a wick. 
• The body represents its opening and closing prices, with the wick attached to the summit representing the maximum price of the digital currency during the period. 
• The wick attached to the base represents the minimum price of the asset within the chosen time frame. 
• A red candle signifies that Bitcoin's price has declined, whereas a green candle shows that the price has appreciated. 

Different patterns can describe candlestick charts, and it’s up to you as a trader to take a position depending on the candlesticks' shape, size, and color. 

• Hammer candle pattern: May tell us that the digital currency is nearing the bottom of a downtrend. The candle's body is short, representing the hammer, while the lengthy wick signifies sellers are driving the prices low during a certain trading period. It is known as a bullish reversal pattern indicating that once Bitcoin bottoms out, buyers might create purchasing pressure, driving the price upwards. 
• Shooting star candle: Describes a pattern that happens at the height of a rally before a reversal kicks in and the price starts to trend down. It is also known as a bearish reversal pattern. A candle represents this formation with a long upper wick and a small body. 

Top Bitcoin Chart Analysis Indicators 

Let’s examine some of the most popular chart analysis indicators Bitcoin traders use.

Bollinger Bands

Bollinger Bands can help traders identify short-term movements in the price of Bitcoin (BTC). The bands indicate high and low volatility periods and are used with other indicators. Bollinger band parameters can be adjusted to accommodate the highs and lows of Bitcoin’s prices and the trader’s time preference. When the price of Bitcoin moves beyond the upper band, it’s considered overbought. If it moves below the lower band instead, it is supposed to be oversold. 

RSI 

The Relative Strength Index (RSI) is a momentum indicator that measures whether a digital asset is being overpurchased or oversold. It is represented as a line between two opposites and can range from 0 to 100. 

The index commonly uses a 14-day time interval for a digital asset to be considered oversold when its value declines to 30 and overbought when its value appreciates to 70. To put it in another way, if the line moves up, (overbought), then the price may soon drop, but if the line moves down (oversold), the price may soon rise.

MACD 

Moving Average Convergence Divergence (MACD) is a trend-following momentum indicator comprised of three numbers. It aims to offer insights into an asset's future price based on price movements. 

• The first number denotes the periods used to calculate a faster-moving average. 
• The second indicates the periods used to calculate a slower-moving average.
•  The final number represents the bars used to compute the average of the amount by which the results of the first two numbers differ. 

The intersection of the faster-moving and slower-moving averages is known as a convergence. On the other hand, the scenario where the faster-moving average deviates from the slower-moving average is known as a divergence. Movements in the MACD indicator can show overbought and oversold levels and possible trend reversals.

Is Technical Analysis a Good Approach to Investing in Bitcoin? 

Technical analysis involves taking Bitcoin’s past trading patterns and price volatility in an attempt to determine where the market will go next. It operates under the assumption that the market is fully efficient when pricing an asset. All past and present information are considered to provide the basis of Bitcoin’s current value. No chart indicator or technical analysis strategy can accurately determine where the price will go next. 

Purely focused on charts is probably not a good approach to investing in Bitcoin. Also, technical analysis is more of a short-term trading tool than a long-term investment approach. Most traders typically use chart analysis to identify entry and exit levels as opposed to as a standalone tool to make investment decisions. 

Your Essential Bitcoin Analytics Tool

Bitcoin Magazine Pro offers a comprehensive suite of analytics tools to help investors and enthusiasts gain a deeper understanding through data. 

The platform provides:

• Free Tools: Access a wide range of regularly updated Bitcoin charts with detailed explanations, making complex data easy to understand. 
• Paid Tiers: Offer advanced features like chart alerts, exclusive indicators, and in-depth market reports. 

Whether you're an investor looking to understand Bitcoin’s price drivers or an analyst eager to expand your knowledge, Bitcoin Magazine Pro provides the clarity and insights you need to make informed decisions.

Save 30% on Bitcoin Magazine Pro's Bitcoin analysis tool today when you sign up for our annual plan!

How Low Can the Bitcoin Price Go?

Bitcoin is off to a rocky start in October 2024. After reaching a price of $66,000, the coin dropped to below $60,000 in just three days, and technical indicators suggest that further downside may be on the horizon.  

Bitcoin’s Current Technical Structure 

Bitcoin’s current price action is concerning from a technical perspective. Despite a recent price rally, the coin is forming a bearish engulfing pattern on the weekly chart. This pattern typically indicates further price decline after a short-term rally.  

Support Levels to Watch 

If Bitcoin’s current correction continues, there are several key support levels to watch using technical analysis. 

Bitcoin is currently bouncing from a key demand zone between $60,500 and $57,400. This zone also coincides with the 0.50-0.618 Fibonacci retracement levels. The area between these two levels is often referred to as the “golden zone” where traders look to buy Bitcoin for potential reversals.  

While Bitcoin is currently sitting just above the golden zone, the price will likely fall below $60,000 in the coming days. Independent analyst Dentoshi notes that losing the 4-hour EMA-200 would confirm a further chop for BTC and highlight a potential sweep of the lower golden zone at $57,400.  

CME Gaps and Liquidation Levels 

Another concerning factor is the unfilled CME gap at $54,000. Bitcoin’s recent rally started shortly after a gap was formed on the Bitcoin futures CME chart between Sept. 6 and 7. Gaps tend to get filled, and retesting the CME gap at $54,000 should be the last level of support for Bitcoin before the bullish structure is disrupted.  

Bitcoin's liquidation levels align with the CME gap. Currently, there is an estimated $612 million in liquidation, with a positional value of around $54,370. If Bitcoin drops below the CME gap, it would increase the chances of a further decline to $52,510, invalidating the current bullish structure.   

Prolonged Downturns and Macroeconomic Influences 

Bitcoin is known for its extreme volatility, and it is not uncommon for the price to witness prolonged downturns after reaching a new all-time high ATH. After reaching nearly $70,000 in November 2021, Bitcoin declined to $15,500 by December 2022 — a drop of 77% that took over a year to complete.

Prices have not been this low since late 2020, causing significant damage to Bitcoin’s technical structure. Today, many analysts warn that further macroeconomic influences could exacerbate any further declines as Bitcoin becomes increasingly correlated to traditional finance. 

Do the Biggest Bitcoin Price Swings Happen on Weekends?

Many eagerly await weekends as a much-needed break from the workweek, but in the past, there have been claims that the weekends were one of the best times to trade and profit from Bitcoin volatility. Is this true? Well, like many other investments, it depends. There are always drops in volume on these traditional days off, but generally, prices experience large swings in both directions no matter what day it is. 

An analysis of data from 2022 and 2024 (through August) suggests that weekends provide Bitcoin trading opportunities similar to those of any other day of the week.

History of Bitcoin Volatility on Weekends

Bitcoin’s average price rose rapidly from 2017 to 2018, climbed significantly in 2021, dropped through 2023, then rose to new highs in 2024. The following table lists average prices for each year. 

 

Using only these figures, it appears that average weekend price changes are not much different from weekday changes. Volume tells a different story, but not in the way the average change figures present it. 

Can You Profit When Bitcoin Is Going Down?

Buy the Dip: The Oldest Trick in the Book

When Bitcoin’s price suddenly drops, it’s a great opportunity to buy more at a reduced price. Psychologically, this can feel painful, especially watching your portfolio value tumble. But if you’re a long-term Bitcoin investor, this is a fantastic chance to accumulate more of the asset before the price recovers. After all, buying Bitcoin after a price correction is better than buying it at its all-time highs! 

A Strategy for Consistent Investment

The strategy is simple: If Bitcoin suddenly drops by 20%, you can use the extra cash you have set aside to buy more Bitcoin to lower your overall cost basis. If you’ve been following Bitcoin for a while, you already know that the price hasn’t stayed low for long. So, instead of panicking when Bitcoin drops, take a breath and consider how you can benefit from the dip. 

Target Allocation for Bitcoin Investment

I recommend allocating a fixed percentage of your total investment portfolio—somewhere between 1% and 5% is a safe bet. When the price of Bitcoin drops, you’ll likely fall below your target investment allocation. You can buy more until you are back at your target. 

Bitcoin Exposure Through Dollar-Cost Averaging

You can sell off some of your profits when Bitcoin's price recovers to keep your portfolio balanced. I’ve been investing 1% to 3% of my portfolio in Bitcoin since 2017, and sticking to this target allocation has let me take advantage of dips and cash out on profits at Bitcoin’s highs. It’s helped me manage big swings in Bitcoin’s price by always keeping my exposure aligned with my goals.

Limit Orders: Avoid Emotional Bitcoin Trades

Most people think they are at the mercy of Bitcoin's market price if they want to sell it. However, you can choose the price you feel comfortable letting your coins go for. Limit orders allow you to sell financial security only if it reaches a certain price during a specified period. 

A Useful Tool for Trading Digital Currencies

Many experienced investors use limit orders to trade in the stock market, but now limit orders are also available on many digital currency exchange platforms! Because trades around the world and the clock, the best prices to execute a sale can happen when you’re unavailable to make a trade, like in the middle of the night. 

Setting Up a Limit Order for Bitcoin

Setting a limit order ensures your Bitcoin will be sold even if you’re not logged in to press “sell.” To set a sell limit order for Bitcoin, you choose a price higher than the current market price and a period. Because markets are open 24/7, you will select a specific date for your limit order. Typically, people set their limit orders to expire in 24hrs, 48hrs, 7 days or 30 days, but your platform may offer additional options. 

Risks and Benefits of Limit Orders

Your Bitcoin will only be sold if the price reaches the limit order price you set before the order expires. When using limit orders, your trade will be executed automatically, so ensure you’re comfortable with your chosen price. If the cost of Bitcoin continues to rise higher than the price you selected, you will miss out on those gains because your coins will have already been sold.

Swing Trading: Take Advantage of Bitcoin Volatility

You should expect double-digit price jumps. If you’re a skilled trader, instead of being scared of volatility, you can use it to your advantage with swing trades. Swing trading is the practice of making short-term bets on price movements of a financial security. Instead of buying and holding for the long term, you may only hold a financial security for a few months or a few days, or even a few hours before selling. 

Strategy for Capitalizing on Price Volatility

Because Bitcoin’s price is so volatile, it can be great for swing trading. Double-digit price jumps in a few hours or over a day are normal, which is a huge opportunity to profit from swing trades. You need to pay attention to the markets and have a good amount of Bitcoin to make it work. Make sure to transfer the Bitcoin you’ll be trading to your exchange platform so you’re ready to take advantage of large price movements. 

Setting Up for Successful Swing Trading

You can set limit orders to execute trades automatically when Bitcoin hits your price targets, or you can set alerts on your phone to notify you when Bitcoin hits a certain price or moves by a certain amount. Many exchange platforms email their user base whenever Bitcoin’s percentage price change is double-digit. Before you start swing trading, make a trading plan that includes your entry and exit price targets for Bitcoin. 

Discipline in Swing Trading

You must stick to this trading plan to avoid making emotional decisions in response to Bitcoin’s price movements. Swing trading only works if you’re making rational, math-based decisions. Your intuition will likely tell you to do the opposite of what your spreadsheet does, so you need to be exceptionally disciplined to execute your planned trades no matter what Bitcoin’s price is doing.

Profit from Down Bitcoin Markets: Buy an Inverse Bitcoin ETF

One of the easiest ways to hedge against downturns in Bitcoin’s price is to purchase shares of an inverse Bitcoin ETF. Horizons launched the BetaPro Inverse Bitcoin ETF in April 2021. It trades on the Toronto Stock Exchange under the ticker BITI.TO and is available in Canadian and US dollars. 

Inverse Bitcoin ETFs Work

This ETF moves in the opposite direction of Bitcoin. It trades at -1X Bitcoin’s price, which means if the price of Bitcoin decreases by 10%, the share price of the BITI.TO ETF will increase by 10%. Likewise, if the trend reverses and the price of Bitcoin increases, the value of the inverse Bitcoin ETF shares will go down proportionally. Inverse ETFs make it easy to place a bet against a security without the hassle of having to do a short Bitcoin sale. 

Using an Inverse Bitcoin ETF

If you’re bearish on Bitcoin, want to hedge your long position, or simply want to profit from Bitcoin’s down market cycles, an inverse Bitcoin ETF is the simplest way to do so. To buy shares of an Inverse Bitcoin ETF, you need a brokerage account that allows you to access the stock market. Both Questrade and Wealthsimple are excellent choices for discount brokerages because purchasing shares of the ETF will be free on either platform. 

Brokerage Platform for Trading Inverse Bitcoin ETFs

Wealthsimple offers no-commission trading, making it ideal for new investors who are just getting started in the stock market or active traders who will be making plenty of buy-and-sell trades. Questrade offers no trading commissions when you buy ETFs but will charge fees to sell shares of an ETF. Depending on how active you expect your trading to be, which platform is best for you will determine! 

Effective Use of Inverse Bitcoin ETFs

If you plan to invest directly in Bitcoin and an inverse Bitcoin ETF, make sure you make your investments in a way that doesn’t cancel each other out. You’re trying to profit off Bitcoin’s price movements in either direction, which means you want to own Bitcoin when the price of Bitcoin is going up and the inverse ETF when the price of Bitcoin is going down. If you hold both at the same time in the exact amounts, they will cancel each other out and both your profits and losses in Bitcoin will be 0%.

Lend Your Bitcoin to Make Money When Prices Drop

If you don’t want to sell your Bitcoin or buy more, one way to make money is to lend it out. Lender platforms are gaining popularity because they allow long-term Bitcoin holders to earn passive income. You will earn interest on the borrowed balance when you lend out your Bitcoin. Usually, the interest is paid out as more Bitcoin. The transaction is facilitated by a lending platform, which reduces but does not eliminate, the risk of non-repayment from the borrower. 

Lending out your Bitcoin is a great way to turn your digital currency into a passive income source, but the payout is generally small and takes a long time to accumulate. Expect to receive quarterly or even annual payments for the amount borrowed, and in the meantime, your Bitcoin is tied up so you cannot sell or trade it elsewhere. 

Your Essential Bitcoin Analytics Tool

Bitcoin Magazine Pro offers a comprehensive suite of analytics tools to help investors and enthusiasts gain a deeper understanding through data. 

The platform provides:

• Free Tools: Access a wide range of regularly updated Bitcoin charts with detailed explanations, making complex data easy to understand. 
• Paid Tiers: Offer advanced features like chart alerts, exclusive indicators, and in-depth market reports. 

Whether you're an investor looking to understand Bitcoin’s price drivers or an analyst eager to expand your knowledge, Bitcoin Magazine Pro provides the clarity and insights you need to make informed decisions. 

Save 30% on Bitcoin Magazine Pro's Bitcoin analysis tool today when you sign up for our annual plan!

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Save 30% on Bitcoin Magazine Pro's Bitcoin Analysis Tool With Our Annual Plan

Bitcoin Magazine Pro offers a comprehensive suite of analytics tools to help investors and enthusiasts gain a deeper understanding through data.

The platform provides:

• Free Tools: Access a wide range of regularly updated Bitcoin charts with detailed explanations, making complex data easy to understand. 
• Paid Tiers: Offer advanced features like chart alerts, exclusive indicators, and in-depth market reports. 

Whether you're an investor looking to understand Bitcoin’s price drivers or an analyst eager to expand your knowledge, Bitcoin Magazine Pro provides the clarity and insights you need to make informed decisions.

Save 30% on Bitcoin Magazine Pro's Bitcoin analysis tool today when you sign up for our annual plan