Cryptoassets are not regulated financial products so please be aware that trading them carries a considerable amount of risk for your capital. Cryptocurrencies are also not covered by existing consumer protection laws and are not suitable for the majority of investors.

While market movements are part of investing, cryptoassets tend to have much larger peaks and troughs than bonds or stocks. Read on to find out more about some of the factors that cause this volatility.

At times, cryptoassets can see large percentage losses or gains over a very short period. For example, Yahoo Finance (23 February 2026) reports that in May 2021, the value of Bitcoin fell from roughly $40,000 (£29,982) to nearly $30,000 (£22,486) in a matter of days. The shift was caused by headlines stating that China was intensifying its crackdown on crypto mining, which triggered panic selling.

In contrast, though traditional markets still experience shocks, stocks tend to move in smaller increments that are more predictable. So, what drives these movements in the crypto market?

5 factors that contribute to crypto volatility

1. Market development

Cryptoassets are still relatively new – the most popular cryptoasset, Bitcoin, was created in 2009.

It takes time for new financial markets to settle, and many aspects of the market are still being developed. As a result, you’d expect cryptoassets to experience greater volatility than financial markets that have been operating significantly longer.

As cryptoassets become more widely adopted, it’s possible that the market will stabilise, though this cannot be guaranteed.

2. Supply and demand dynamics

A large proportion of cryptoassets is held by a relatively small number of investors.

It can be difficult to find out who holds cryptoassets. However, Bloomberg (25 October 2021) reported in 2021 that the top 10,000 investors in Bitcoin controlled over one-third of the supply. This means the actions taken by these investors can drive the market and shift supply and demand dynamics.

3. Media coverage

Headlines may influence the decisions investors make. At times, you can see the effect news has on traditional stock markets, but the impact may be much larger in the crypto market.

Media sources might present crypto predictions from so-called “experts” as fact, rather than opinion. These articles could influence investor behaviour. For example, people reading about how a certain cryptoasset is set to “soar” might fear missing out on an opportunity and invest their money. Amplified by stories of early investors seeing large returns, media coverage could drive the value of cryptoassets up.

Media coverage can work the other way as well – encouraging investors to sell their assets by suggesting values have peaked.

4. Regulation rumours

In many countries, cryptoassets are largely unregulated. Indeed, in the UK, most cryptoassets are currently outside full regulation; however, this is set to change in 2027.

As the UK and other countries assess how to regulate cryptoassets, rumours emerge. Like other media coverage, this speculation can lead to the value of assets rising and falling.

5. 24/7 global trading

Traditional investment markets have set trading periods. However, the crypto market doesn’t close. Coupled with the lack of regulation, this means there are no crypto market circuit breakers, which are designed to curb panic selling and reduce volatility during periods of uncertainty.

The London Stock Exchange (May 2020) explains that circuit breakers were first introduced in the US after the Black Monday stock crash in 1987. In the US, a market-wide circuit breaker enforces a trading pause for all stocks for 15 minutes.

Without this mechanism, the crypto market is more susceptible to high volatility.

High volatility and risk mean cryptoassets aren’t suitable for many investors

The high volatility often experienced in the crypto market means these assets aren’t a suitable investment for many people, as they pose a high level of risk and you could lose all of your money.

If you have any questions about your investments, please get in touch.

Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Cryptoassets are not regulated financial products so please be aware that trading them carries a considerable amount of risk for your capital. Cryptocurrencies are also not covered by existing consumer protection laws and are not suitable for the majority of investors.