QUESTION: Why is the exact price of bitcoin constantly changing little bits up and down all day long

00:02 If you’re new to Bitcoin, you probably
00:04 wonder why does the price of Bitcoin go
00:07 up and down little bits constantly all
00:09 the time. In fact, if you just watch the
00:12 price every few seconds, the price of
00:14 Bitcoin is changing. So, what is causing
00:16 that? What is making the price go up and
00:17 down? Well, this often confuses people
00:20 that are new to Bitcoin, but actually
00:22 what they don’t realize is the same is
00:23 true for everything that trades on any
00:26 market. So any stock, any bond, any
00:29 commodity, gold, wheat, silver, barley,
00:33 you you name it. Everything when a
00:35 market is open is constantly in a state
00:38 of flux that is driven by supply and
00:40 demand. You just don’t see it because at
00:42 the grocery store, the price of eggs
00:44 only changes every few days or every few
00:46 weeks. Um whereas the people who are
00:49 actually buying and selling eggs on a
00:51 daily basis in large volumes, they
00:54 understand that the price of a dozen
00:55 eggs or 1,000 eggs or whatever is
00:58 constantly in flux. A few cents up, a
01:00 few pennies down, a few dollars up, a
01:02 few dollars down, up, down, up, down all
01:04 day long, just like the price of
01:05 Bitcoin. So what causes that behavior in
01:08 any market? Well, one way to think about
01:10 it is that a market is like an elevator
01:13 with a finite number of people that can
01:15 get on, you know, be on the elevator at
01:17 the same time. And the elevator only
01:19 has, if you’re on the elevator, you only
01:22 have one button you can push, which is
01:24 the I want to get off button, which is
01:27 what’s selling. If you own something and
01:28 you want to sell it in a market, you
01:30 basically only have one button, which is
01:32 the I want to get off button off of the
01:34 elevator. And if you push that button
01:36 from inside, the elevator is supposed to
01:39 go to down to the nearest floor and let
01:42 you off. But if you’re outside the
01:44 elevator, you exactly have one button
01:46 you can push, which is I want to get on
01:48 the elevator. And if you push the I want
01:50 to get on the elevator button, the
01:52 elevator has to come up to get you to
01:56 from wherever it is. If you push the I
01:58 want to get on button, it’s got to go to
01:60 the next highest floor. So, because
02:02 again, anytime you sell something into a
02:04 market, it pushes the price down. Even
02:06 if it pushes the price down normally
02:08 such a microscopic amount, like if I go
02:10 sell $100 on Coinbase right now, the
02:13 effect on the price of Bitcoin is
02:15 probably 1 1 millionth of 1 millionth of
02:17 1 millionth of a penny. Obviously,
02:20 you’re not even going to notice, but
02:21 every buy of sell of anything on any
02:24 market causes the price to go up. Now,
02:27 again, you may not see that reflected in
02:28 the prices. If you go to a farmers
02:30 market, you may not see the prices
02:32 constantly changing all day long. And
02:33 that’s just because they don’t want to
02:35 bother adjusting prices to supply and
02:37 demand. But if you’re on a large market
02:39 with a lot of what’s called liquidity,
02:41 liquidity means with a lot of buying and
02:43 selling, then you’re going to see that
02:44 you’re going to see the price of a uh
02:47 you know, a barrel of oil is constantly
02:49 changing. Maybe it’s just by pennies,
02:51 but the price of a barrel of oil when
02:53 the markets are open is in constant
02:54 flux. the price of gasoline again in
02:57 major markets uh not at the gas pump
02:60 because they don’t they only update the
03:01 price every few days or every you know a
03:03 couple times a day but if you are
03:04 actually trading gas or buying and
03:06 selling it in large volumes before it
03:08 goes to the gas pump you’re seeing the
03:10 the price in a constant state of flux.
03:13 Okay so let’s go back to our elevator
03:15 analogy. Okay so you got an elevator and
03:18 each floor represents $1,000. So like
03:20 right now we’re at 117 $118,000 coin. So
03:24 the elevator is near floor 118. It’s
03:28 actually kind of between floor 117 and
03:31 118. So all the people who want to get
03:34 on the elevator are up there on floor 18
03:36 mashing the button to try to get it to
03:39 come up to 18 to get them on. Because
03:41 again, remember if you mash the button
03:43 that you want to get on the elevator,
03:45 you have to be on the floor above where
03:46 the elevator is. Unless the elevator
03:48 door is open. If the elevator door is
03:50 open, you can get on and off at that
03:52 floor. But if it’s between floors, you
03:55 only can get on by mashing the button to
03:57 get on the floor above. But remember, if
03:60 you’re between floors and you want to
04:01 get off the elevator and you mash the
04:03 button from inside the elevator, it’s
04:05 always going to go down to the next
04:07 floor to let you off. All right, so
04:09 where does the elevator go? The elevator
04:11 represents the price of Bitcoin at any
04:13 instant in time. The answer is the
04:15 elevator is in a constant state of
04:17 motion. Sometimes it’ll hold in one spot
04:20 for like right at $18,000. It’ll hold
04:23 because there’s enough people that are
04:25 buying or selling at exactly $18,000 to
04:28 hold the price steady for like a few
04:30 seconds or even 30 seconds sometimes,
04:32 right at a major point. That’s like when
04:35 the elevator door is open at floor 118.
04:38 And it just so happens right at a floor
04:40 at 118, a bunch of people are mashing
04:42 the button on both sides of floor 118
04:45 saying, “I want to get on. I want to get
04:46 off.” So, the elevator doors open and
04:48 people are streaming on and off the
04:49 elevator real time, real time, real
04:51 time, real time, real time at 118. But
04:53 guess what? Very quickly, typically
04:55 within a few a matter of a few seconds,
04:57 uh, the number of people who want to get
04:59 on and the number of people who want to
05:01 get off are no longer in balance. Which
05:03 means there’s more people mashing that
05:04 they want to get on as compared to
05:06 mashing that they want to get off. And
05:08 as soon as you have that imbalance, the
05:09 elevator has to either because again at
05:13 that point, as soon as there’s an
05:14 imbalance, the door closes. Which means
05:16 if people are still mashing the button,
05:18 they got to mash up from floor 19 to try
05:20 to get the elevator to come up and pick
05:22 them up or they got if they’re in the
05:24 elevator, they’ve got a mash that they
05:25 want to go it to go down to floor 17. So
05:28 the question is where’s the elevator
05:30 going to go? You got the people on the
05:32 elevator, some of them are mashing that
05:34 they want to get off at floor uh 7 117,
05:38 but you’ve got people up at 118 who
05:41 missed the elevator door open when it
05:43 was temporarily at 118. And now they’re
05:46 up at 119 mashing the button, mashing
05:48 the button, mashing the button, saying,
05:50 “I want to get on. I want to get on. I
05:51 want to get on.” And remember, the
05:52 elevator has to go up. If you want to go
05:54 on, get on. But it has to go down if you
05:57 want to get off. So what’s where’s the
05:58 elevator going to go? What’s going to
06:00 happen? Well, the answer is what’s going
06:03 to happen. Give me one second here to
06:04 pick a park parking spot. Um,
06:08 what’s going to happen in that situation
06:10 is it depends on who’s mashing the
06:12 button more. If the people inside the
06:15 elevator, which is the sellers, the
06:16 people who want to sell Bitcoin, if the
06:18 people inside the elevator are mashing
06:20 the button more to try to sell, then the
06:22 elevator will go down to floor 117 to
06:25 let them off. If more people are up at a
06:28 floor 119 mashing the button, wanting
06:30 the elevator to come up and pick them
06:32 up, then you know we’re going up to 119.
06:36 Now, typically we’re always between a
06:39 $1,000 threshold and typically people
06:42 sell. The only time uh the price
06:43 stabilizes is typically at major
06:46 milestones because enough people were
06:48 buying and selling at exactly that
06:49 price. So typically you will not see the
06:52 price stay for like 30 seconds at a
06:55 price like 80, you know, 118,436
07:00 and.32. Like you’re normally not going
07:02 to see it uh stop at some arbitrary
07:06 number and just like hold there because
07:08 again that’s sort of between floors and
07:10 elevators just don’t stop between
07:12 floors. they’re either, you know, sort
07:14 of slowly going up, slowly going down,
07:16 and you can get on and off, but again,
07:18 you’re you’re always pushing it one way
07:19 or the other. Um, so obviously tons of
07:22 people are buying and selling Bitcoin
07:23 between 117 and 119. And every time they
07:28 do that, the people who push the button
07:29 to get off the elevator are pushing the
07:31 elevator down. Every time somebody wants
07:33 to get on, they’re pushing they’re sort
07:36 of pulling the elevator up. And so
07:38 supply and demand is a constant pushing
07:40 and pulling battle. where, you know, the
07:43 people on the elevator are pushing the
07:45 button to get off, which pushes the
07:47 elevator down, and the people who want
07:49 to get on are pushing the button from
07:50 the floor above where the ever the
07:52 elevator is, trying to get, you know, to
07:55 get them to let them on the elevator.
07:57 Um, and as a result, it’s just in a
07:59 constant state of flux. So, obviously,
08:01 the actual market doesn’t have like hard
08:04 thresholds like that, 117, 118, 119. It
08:07 might pause there for a few seconds
08:09 while it just clears out whoever is
08:11 buying and selling at that point. But
08:12 generally all day long, the elevator is
08:15 between floors and the people who are
08:18 pushing sell from the inside are pushing
08:20 it the elevator down by a microscopic
08:23 fraction of a millimeter and the people
08:24 who are outside the elevator pushing a
08:27 button are pushing it from the floor
08:28 above saying, “Hey, I’ll get on, but I’m
08:30 willing to pay a little bit more than
08:31 the sellers.” Uh, and that’s what
08:33 happens all day long with every market.
08:35 Again, it doesn’t matter if it’s wheat,
08:36 corn, soybeans. It doesn’t matter if
08:39 it’s gold, silver, a barrel of oil, you
08:42 know, diamonds. Everything trades that
08:44 way in a constant push and pull of
08:46 supply and demand. And that constant
08:49 push and pull, you know, you end up with
08:51 the the sellers are, you know, the
08:53 sellers have a hand, so the price is
08:55 going down. Then the buyers have, you
08:57 know, they have the upper hand, so the
08:58 price is going up and then buying and
08:59 selling and buying and selling. It’s
09:01 called bulls and bears. The people who
09:03 are want who are buying are called bulls
09:05 because bulls attack by you know uh
09:08 tossing their horns up and the people
09:11 who are bearish. Uh bears attack by
09:14 slashing down with their claws. So
09:15 they’re called bears. So the people who
09:17 are selling anything are uh typically
09:19 bears. People who are buying something
09:22 are called bulls. Uh that’s also used to
09:24 refer to people who are just bullish on
09:26 something means optimistic about the
09:28 long-term future of an asset. And the
09:30 bears are people who are pessimistic of
09:32 the long-term future of an asset. So,
09:33 the bulls want the price to go up, the
09:35 bears want it to go down, the bulls are
09:38 usually buying, the bears are usually
09:40 selling. And uh and it’s that tension.
09:42 It’s that tension that people are just
09:44 not used to seeing because usually
09:45 Bitcoin is the very first thing they’ve
09:47 ever owned or bought where they can see
09:50 that happen in real time. People are
09:51 just not used to that. They’re not
09:52 seeing that real time because nothing
09:55 else they buy. gas at the gas station,
09:57 eggs at the grocery store, everything
09:59 else they buy, the price is only getting
10:01 updated a few times a day or a few times
10:04 a week or for some things a few times a
10:05 months or or a year. Um but behind the
10:08 scenes on the markets where those things
10:11 trade before they get to the store or
10:14 the consumer or the car lot or whatever
10:16 it is on those markets behind the things
10:19 the price is in a constant ever
10:22 everpresent state of a little bit up a
10:24 little bit down a little bit up a little
10:25 bit down up up down down up up you know
10:28 all that. Um, so if the price is uh
10:31 tipping down with Bitcoin, it means that
10:34 very temporarily the people inside the
10:36 elevator mashing the button to get off
10:38 are outweighing the number of people
10:40 outside the elevator mashing the button
10:42 to get on. So if um you know more people
10:45 want to sell Bitcoin if the price is
10:47 trending down, more people are wanting
10:48 to buy, you know, the the the balance
10:50 between buyers and sellers. If it’s
10:53 tipped in favor of more buyers than
10:55 sellers, the price goes up. If it’s
10:56 tipped in favor of more sellers than
10:58 buyers, the price is going down. Uh if
11:01 that imbalance is happens quickly where
11:04 there ends up being a lot more buyers
11:06 than sellers, then you get this rip
11:08 where the price goes from 108 to 118
11:11 very quickly. Uh the reverse can happen.
11:13 You know, we saw this most recently when
11:16 the United States uh bombed the nuclear
11:18 facilities in Iran, uh where the price
11:21 of Bitcoin dipped from like 108,000 to
11:24 like 99,000 very quickly in a series of
11:27 hours or whatever it was. Same thing. A
11:29 bunch of people panicked. The people
11:30 inside the elevator all panicked at the
11:32 same time. They’re all mashing the
11:34 button. Let me out of the elevator at
11:36 any price. At any price, get me out.
11:37 Getting get me out. So, you know, people
11:39 start bailing from the elevator. They’re
11:41 bailing at, you know, whatever, 107,
11:44 106, 105. The elevator keeps dropping
11:46 and they’re just mashing that button.
11:48 Get me out at any price. Get me out at
11:49 any price. Get me out at any price until
11:51 it gets down to about 99,000. At which
11:54 point the people outside the elevator
11:55 are like, $99,000 Bitcoin. Are you
11:58 idiots? Yeah. You want to get off the
11:59 elevator and give give me your spot at
12:01 99,000? I will take it. And so, you
12:04 know, as the price dropped from 108 or
12:06 105, I think it was like 105. as it
12:08 dropped from 105 to 99, as it dropped,
12:11 more and more people got off the
12:13 elevator. And so there were fewer people
12:15 that wanted to get off the elevator
12:16 because more of them had gotten off the
12:18 elevator as it dropped. But as the price
12:21 dropped, the more people on the outside
12:22 mashing the button, you know, 104 people
12:25 on the outside are like, “Ooh, a
12:26 discount.” They start mashing the
12:27 button. 103 more people mash the button
12:30 on the outside saying, “I want on this
12:32 elevator at 103.” And then two, 101, 99.
12:36 Suddenly at 99, there’s a cacophony of
12:38 people mashing the button outside the
12:40 elevator saying, “Please, please, please
12:41 give me Bitcoin below $100,000. Get
12:44 these idiots off the elevator that don’t
12:46 know what they hold. They don’t know why
12:47 they’re selling. Let’s get those people
12:49 off the elevator. I’ll take their spot
12:50 for $99,000.” And so, and so they, you
12:53 know, the elevator stops and the
12:55 everybody swaps and, you know, they’re
12:57 constantly buying and selling all the
12:58 way up and down. But eventually at, you
13:00 know, 98,762
13:03 or whatever it was, the number of people
13:05 outside the elevator mashing that they
13:07 wanted to get on outnumbered the people
13:09 of inside the elevator mashing the
13:11 button cuz they’re scared of the Iran
13:12 attack and a World War II and a, you
13:15 know, worldwide recession, all this sort
13:16 of stuff. And it’s again, that’s what a
13:18 market is. It’s people inside the
13:20 elevator wanting to get off, pushing the
13:22 price down, and people outside the
13:24 elevator wanting to get on, pushing the
13:26 price up. And obviously, you know, the
13:28 the place the analogy breaks down is you
13:30 can buy and sell at any price. So it’s
13:32 not like you have to be, you know,
13:33 elevators you can only get on and off at
13:35 a floor. In the case of any anything
13:37 else, you can get off at the penny. So
13:40 there’s like an 100 increments between
13:42 floors and a th000 increments between
13:44 that cuz obviously it’s not like you can
13:46 only get off 118,000 or 117,000. You can
13:49 get off at every dollar increment
13:51 between that and you can get off at
13:52 every penny increment between every
13:54 dollar increment. you can literally buy
13:56 and sell at any price uh for Bitcoin,
13:59 you know, rounded to the nearest penny.
14:01 And so that’s the way it trades. And it
14:03 trades that way in other currencies as
14:04 well. It trades that way in all
14:06 currencies around the around the world.
14:07 So you can get off at tiny fractions of
14:10 a Japanese yen or a Chinese one or a
14:12 euro or whatever it is. Um so anyway, uh
14:15 so it’s helpful for people sometimes to
14:17 think about the whole thing as an
14:18 elevator with people inside mashing. I
14:20 want to go down and get off and people
14:22 outside mashing please come up and pick
14:24 me up and the price is just it’s just
14:27 the balance of the people mashing
14:29 mashing on both sides the sellers and
14:31 the buyers the I want to get offs and
14:33 the please let me ons whoever outweighs
14:36 the other at that exact moment in time
14:38 is going to either pull that elevator up
14:40 by a penny or two or five or $10 or
14:43 $1,000 or the people inside mashing I
14:46 want to get off are going to push it
14:47 down a penny or a dollar or $1,000
14:50 or Iran nuclear strike $6,000. It’s just
14:54 it’s just happening real time all the
14:56 time. And if you want to see it happen
14:57 even faster than you see it, you know,
14:60 normally uh normally in the standard
15:02 interface of Coinbase and the standard
15:04 intera interface of River, it updates
15:06 every few seconds or if you swipe down,
15:08 it’ll update real time. Uh the easiest
15:11 way to see it update real real time is
15:13 to flip uh Coinbase to the advanced
15:15 mode. If you flip Coinbase to the
15:18 advanced mode, you can actually scroll
15:19 down and watch the trading volume. And
15:21 you can see it’s just
15:24 I mean just an avalanche of buying and
15:27 selling constantly. And then right above
15:29 that you see the price and the price is
15:31 just updating. Especially if you do it
15:33 on a laptop, if you do it on a mobile
15:34 device, it updates like every second or
15:36 two. Uh or not, it’s like every, you
15:39 know, a few times a second. If you look
15:41 at it on a desktop computer, it updates
15:44 like super real time. I mean, the price
15:46 is just like,
15:49 and again, it may only be changing by a
15:50 penny or two or five or 10, but like the
15:52 if you look at uh Coinbase Advanced on a
15:56 desktop computer, it’s like I mean, it’s
15:59 just the the level of buying and selling
16:01 is just absolutely insane. So, um,
16:03 hopefully that helps you understand why
16:05 the price is in a constant state of
16:06 flux. And hopefully it helps you to
16:08 understand that everything you buy
16:10 somewhere has a price that’s in a
16:12 constant state of flux. You just don’t
16:14 see that because they even it out,
16:16 smooth it out, and only change the price
16:18 infrequently where you actually buy
16:20 stuff. In the grocery store, at the gas
16:22 pump, on the car lot, whatever it is
16:24 you’re buying, they try to hold the
16:26 prices much more steady for longer so it
16:28 doesn’t freak people out with all that
16:30 changing. But behind the scenes, every
16:31 market is buyers and sellers, supply and
16:34 demand, and the price is in a constant
16:36 state of flux. Bitcoin is no different.
16:38 That’s just the way it is. Have a great
16:40 day, everyone.