Why does the price of Bitcoin go up (and down)?

How the bitcoin exchange market works

By the Lightning Pay Team

Updated 17 Dec, 2024

Bitcoin is one of the biggest markets on earth, with Bitcoin being traded 24 hours a day 7 days a week. Generally speaking when people are buying Bitcoin this pushes the price up, and when they are selling this pushes the price down.

Bitcoin Trading, an example

To understand why this is true and how this happens here is an example;

There are a limited number of Bitcoin for sale on global Bitcoin exchanges. There could be 1 for sale at $58,000, 2 for sale at $ 59,000 and 3 for sale at $60,000.

The current best price of Bitcoin at this exchange is $58,000. That is the cost of the cheapest Bitcoin for sale.

If I come along and I want to buy 2 Bitcoins, then I will first buy the cheapest one at $58,000. To buy the next Bitcoin I then have to buy one of the ones for sale at $59,000. I do this, and then the only bitcoin left for sale is the one at $59,000 and the 3 more at $60,000.

The current best price of Bitcoin at this exchange is now $59,000. My buying has pushed the price up $1,000.

The same effect but with selling on the exchange pushes the price down.

Here is a hilarious video explaining how this kind of trading works to affect price