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.