Bitcoin’s price can feel like it moves for “no reason” — up 8% on a calm Tuesday, down 12% when you blink. But under the noise, the same forces keep showing up. Some are obvious (demand), some are structural (Bitcoin’s fixed issuance schedule), and some are uniquely crypto (derivatives liquidations). If you’re trying to understand Bitcoin without getting lost in daily headlines, these are the five factors that matter most.
1) Global liquidity, interest rates, and the U.S. dollar
If you remember only one rule, make it this: Bitcoin is highly sensitive to “risk mood” and liquidity. When money is cheap and investors are confident, Bitcoin often benefits. When rates rise, liquidity tightens, or the dollar strengthens, speculative assets can struggle.
Major market research outlets describe Bitcoin’s short-term drivers as closely tied to broader risk sentiment, interest rates, and the U.S. dollar. Academic work also finds measurable links between crypto returns and macro variables like the dollar exchange rate and yields.
You can see this relationship play out during market stress. For example, Reuters linked a sharp Bitcoin drop in early February 2026 to wider volatility, fears of tighter policy, and shifts in institutional positioning.
Why it moves price:
- Higher interest rates can make safe assets more attractive and reduce speculative appetite.
- Stronger USD can pressure dollar-priced risk assets.
- Lower liquidity usually means fewer marginal buyers when sellers show up.
2) Institutional demand and ETF/ETP fund flows
A big structural change in recent years has been “Bitcoin as a product” — easily accessed through spot ETFs/ETPs and broker platforms. When large pools of capital can buy (or sell) quickly, flows can matter as much as narratives.
Research analyzing spot Bitcoin ETP markets finds that flows and price interact strongly — with price moves often driving flows and flows feeding into market dynamics. Another study in Ledger examines a long-run relationship between spot Bitcoin ETF net assets and Bitcoin price.
And in the real world, flows show up in headlines: Reuters has pointed to outflows from bitcoin ETFs as part of broader downside pressure during selloffs.
Why it moves price:
- ETFs reduce friction: pension-style money can enter/exit faster.
- Large redemptions can amplify downside (especially when liquidity is thin).
- ETF flows are widely watched, which can become self-reinforcing.
3) Bitcoin’s supply schedule, halving cycles, and scarcity narratives
Bitcoin’s supply mechanics are simple and brutal: new issuance is cut roughly every four years in a halving event. That doesn’t guarantee higher prices — demand still matters — but it’s one of the most unique fundamentals in global finance.
Recent research has tried to quantify the effect more carefully. An arXiv paper using a “synthetic control” approach finds evidence consistent with a positive effect from the April 2024 halving on price a few months later (while noting weaker causal evidence for the 2020 halving). Peer-reviewed work also discusses how halving events affect returns and how the scarcity narrative shapes market behavior.
Why it moves price:
- Halvings reduce new supply hitting the market daily.
- Traders position for halving narratives well in advance (sometimes making it “priced in,” sometimes not).
- Long-term holder behavior (holding vs distributing into rallies) can magnify or mute the halving effect.
4) Regulation, enforcement, and policy clarity
Bitcoin doesn’t live outside the law — it lives inside many legal systems at once. Regulatory announcements can change how comfortable institutions feel, what exchanges can operate where, and whether major onramps stay open.
There’s empirical evidence that markets react to enforcement news, and that reactions can differ by agency and type of action. For example, research on investor reactions to SEC and CFTC enforcement suggests crypto markets can respond meaningfully — and sometimes more negatively — to certain regulatory signals. At the global level, the Financial Stability Board (FSB) and other bodies have been pushing coordinated crypto-asset policy frameworks, which shapes long-term adoption conditions.
Why it moves price:
- “Clarity” can be bullish if it enables broader participation.
- Sudden crackdowns can reduce liquidity, cut off users, or trigger forced unwinds.
- The same regulatory headline can move Bitcoin and altcoins differently depending on what’s targeted.
5) Market structure: leverage, liquidations, and mining economics
This is the one many people underestimate: Bitcoin’s price is often driven not just by spot buyers and sellers, but by derivatives positioning — leverage piled on top of leverage.
When markets fall quickly, leveraged traders get liquidated. That selling can push price lower, causing more liquidations, creating a cascade. A February 2026 Reuters report explicitly cited forced liquidations as part of the downside dynamic during a major drop. Separate analysis of the October 2025 crypto crash describes how leverage and liquidity interact under stress — a reminder that “plumbing” matters.
Mining also plays a role, especially over longer horizons. Mining has real-world costs (energy, hardware, hosting). When price drops below many miners’ profitability thresholds, miners may shut down, upgrade, or sell reserves — all of which can influence supply pressure and sentiment. Traditional finance commentary has also highlighted the concept of production cost as a reference point in downturns.
Why it moves price:
- Leverage amplifies both rallies and crashes.
- Liquidation cascades create fast, ugly candles.
- Miner profitability and behavior can affect sell pressure and network sentiment.
Conclusion
If you want a practical mental model, think of Bitcoin price as a tug-of-war between:
- Macro conditions (liquidity, rates, USD)
- Institutional rails (ETF flows)
- Structural scarcity (halving)
- Rules of the game (regulation)
- Market plumbing (leverage, liquidations, miners)
No single factor “controls” Bitcoin. But most big moves can be explained by some combination of these five — and when multiple factors align (e.g., tightening liquidity + ETF outflows + leverage buildup), that’s when volatility gets memorable.