Why does Bitcoin’s price react strongly to news events?

Bitcoin’s price reacts strongly to news events due to the high level of speculation and sentiment-driven trading in the cryptocurrency market. News can rapidly influence investor perception and confidence, leading to swift buy or sell decisions. Positive news, such as regulatory acceptance, institutional adoption, or technological advancements, can drive prices up as investors anticipate increased value and stability.

Conversely, negative news, such as security breaches, regulatory crackdowns, or adverse economic developments, can trigger panic selling and significant price drops. The decentralized and global nature of Bitcoin means that news events from any part of the world can impact its price, contributing to its volatility. The relatively low market capitalization compared to traditional assets also means that news can have a more pronounced effect on Bitcoin’s price.