Why is the price of bitcoin so unstable.

Bitcoin is a highly volatile asset since its underlying worth and future value are unknown.
Since there are only so many Bitcoins in existence, a decreasing number of new BTCs are produced every day. Demand must increase at the same rate as inflation in order to keep prices stable. Considering how small the Bitcoin market is in comparison to other sectors, news coverage alone has the power to influence price movements. For instance, news that Tesla is willing to accept BTC may increase its value or vice versa, making the price of Bitcoin extremely unpredictable.

Similar to how a tweet stating that the Bitcoin blockchain has been suspended will lower its value, Bitcoin trading volume will thereafter follow. So, can the price of Bitcoin reach zero given its tremendous volatility? It is technically feasible. For instance, the price of Bitcoin is prone to value crashes since it is not linked to any fiat money, such as the dollar, or any other real-world asset. We have seen, nevertheless, that algorithmic stablecoins like Terra USD can also agitate the market.

However, for such a disastrous occurrence to occur in the case of BTC, many warning signs, such as a protracted bull market, will emerge beforehand to give investors a chance to preserve their money. Additionally, the intricate Bitcoin architecture is difficult to undermine, but problems with scalability could jeopardize the future of the technology. However, that does not imply that BTC’s price would overnight drop to $0.

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