BTC price volatility overview

The fluctuations in the price of BTC have always been a focus of global attention. The macroeconomic situation has a profound impact on it. When the global economy is strong and investors have a high risk appetite, funds tend to flow into traditional financial markets such as the stock market, putting pressure on the price of BTC; conversely, in times of economic instability and increased inflation expectations, BTC, due to its decentralization and fixed supply (21 million coins), is often seen as a safe-haven asset and “digital gold,” and its price may rise. For example, during the global quantitative easing period from 2020 to 2021, the price of BTC soared from a low point to tens of thousands of dollars.

Image Source:https://www.gate.io/trade/BTC_USDT

Regulatory policies are also a key factor affecting the price of BTC. Different countries and regions have vastly different attitudes towards cryptocurrencies. Some countries actively explore the reasonable application of cryptocurrencies and introduce supportive policies, which helps to boost market confidence in BTC and drive prices up; while some countries impose strict regulations or even ban cryptocurrency trading, triggering market panic selling and causing prices to plummet. For example, China has repeatedly cracked down on virtual currency-related business activities, and after each policy release, the price of BTC has experienced significant fluctuations.

Market sentiment and investor expectations are equally important. The discussion heats on social media, cryptocurrency forums, and the views of well-known investors and opinion leaders can greatly influence market sentiment. When the market is generally optimistic about the future trend of BTC, a large number of investors will enter, with strong buying pressure driving prices up; once market confidence is shaken, investors will leave one after another, increasing selling pressure and causing prices to fall.

BTC’s existence on BscScan

On the Binance Smart Chain (BSC) associated with BscScan, BTC is usually represented in the form of Wrapped Bitcoin (WBTC). WBTC is an ERC-20 token pegged to Bitcoin, designed to bring Bitcoin’s liquidity into the Ethereum ecosystem and other compatible blockchain platforms such as BSC.

Image Source:https://bscscan.com/

The birth of WBTC aims to bring the value of BTC into the Ethereum ecosystem and compatible blockchains such as Binance Smart Chain. Its operation relies on specific custody institutions, such as BitGo. When users deposit native BTC into these custodians, the custodians will lock the corresponding amount of BTC and mint the same amount of WBTC through smart contracts on the Binance Smart Chain. For example, when a user deposits 1 BTC, the custodian will issue 1 WBTC on the Binance Smart Chain, ensuring a theoretical 1:1 pegged relationship in value between the two. This mechanism allows users to conveniently use assets equivalent in value to BTC within the Binance Smart Chain ecosystem, participating in various smart contract-driven applications such as DeFi lending, decentralized trading, etc.

In the DeFi field of Binance Smart Chain, WBTC has wide applications. In lending scenarios, users can collateralize WBTC to lending platforms to obtain stablecoins (such as DAI, USDT) for other investments or expenses. For example, in some popular DeFi lending projects, users can lend out the required stablecoin funds at a certain interest rate by collateralizing WBTC, meeting their own fund turnover or investment needs. In terms of decentralized exchanges (DEX), WBTC is often used as an important component of trading pairs, such as the WBTC/BNB (Binance Smart Chain native token) trading pair.

Although WBTC is anchored to native BTC in value, there are significant differences between the two. Native BTC has an independent blockchain, with a high degree of decentralization and security, and its transactions take place directly on the Bitcoin network, following Bitcoin’s mining and transaction confirmation rules. On the other hand, WBTC relies on smart contracts on the Binance Smart Chain, with its transactions and applications mainly revolving around the Binance Smart Chain ecosystem. However, their close connection lies in value pegging. Once the price of WBTC deviates from native BTC, market arbitrageurs will act swiftly. For example, when the price of WBTC is higher than that of native BTC, arbitrageurs will buy native BTC and exchange it for WBTC through custodians, then sell WBTC on the Binance Smart Chain to profit. This process drives the WBTC price back to a reasonable corresponding relationship with native BTC.

The role of BscScan in BTC price analysis

(1) Trading Activity

On BscScan, the trading activity of WBTC serves as an important indicator for assessing BTC price fluctuations. When the number of WBTC transactions and trading volume increase significantly within a short period, it indicates a sharp rise in market attention and participation. This often suggests that investors’ expectations regarding BTC’s value are shifting. For example, if a large number of small transactions occur frequently, it may indicate that retail investors are optimistic about BTC’s market outlook and are actively entering the market. Such widespread participation enthusiasm could drive BTC prices upward. Conversely, if trading activity remains sluggish, with both transaction count and volume at low levels, it may reflect declining market interest in BTC. In this case, the lack of momentum to push prices higher could put downward pressure on BTC.

Image Source:https://bscscan.com/

(2) Fund Flow Analysis

Tracking the flow of funds for WBTC through Bscscan can provide key information for predicting the price trend of BTC. It is crucial to observe the movement of WBTC between different addresses, especially the operational trends of large whale addresses (addresses holding a large amount of WBTC). When whale addresses continue to increase their holdings of WBTC, transferring a large amount of funds from exchanges or other addresses to their own wallets, it indicates that these powerful investors are optimistic about the future development of BTC. Their large-scale buying behavior may trigger market sentiment, attract more funds inflow, and thus drive up the price of BTC. Conversely, if whale addresses start to sell off a large amount of WBTC, transferring funds out of the Binance Smart Chain ecosystem, it may trigger market panic, prompting other investors to follow suit and sell off, leading to an oversupply in the market and a decline in the price of BTC.

Image source:https://bscscan.com/

(3) Market Supply and Demand Relationship

Bsc Scan data can also reflect the market supply and demand relationship of WBTC on the Binance Smart Chain, thereby affecting the judgment of BTC price. In the DeFi lending scenario, if many users collateralize WBTC on lending platforms to obtain other assets, it means that there is a strong demand for WBTC in the market. According to the collateral data on lending platforms on Bsc Scan, if the collateral amount of WBTC continues to rise and the available WBTC for lending relatively decreases, indicating a situation of supply shortage, under this circumstance, the price of WBTC may rise. As WBTC is linked to the value of BTC, it may drive up the price of BTC. On the other hand, when the supply of WBTC in the market suddenly increases, such as a large amount of WBTC being released from custody to the Binance Smart Chain, and the demand does not grow correspondingly, an oversupply situation may lead to a decline in the price of WBTC, exerting downward pressure on the price of BTC as well.

Risk Warning

(1) Technical Risk

Many transactions on Binance Smart Chain rely on smart contracts to execute. Smart contracts may have code vulnerabilities, logic errors, and other issues. Once discovered and exploited by hackers, it may lead to abnormal transactions, asset theft, and other situations. For example, in the past, projects have had users’ encrypted assets maliciously transferred due to smart contract vulnerabilities.

If BTC is transferred to Binance Smart Chain for trading through cross-chain bridges, there are certain risks associated with the cross-chain technology itself. During the cross-chain process, there may be transaction delays, transaction failures, and even asset losses. This is because cross-chain transactions require complex communication and coordination between multiple blockchain networks, and any problems in any link may affect the smooth progress of transactions.

(2) Market Risk

Even tokens like WBTC pegged to BTC may deviate from the original BTC price due to market supply and demand, liquidity, and other factors. Moreover, the cryptocurrency market as a whole is highly volatile, with BTC prices influenced by various factors such as macroeconomic conditions, policies and regulations, and market sentiment, leading to significant fluctuations in prices in a short period of time, resulting in rapid changes in investor asset values.

(3) Regulatory Risk

Regulatory policies on cryptocurrencies vary across different countries and regions, and are constantly changing and improving. Trading activities related to BTC on the Binance Smart Chain may face regulatory uncertainties. Some regions may strengthen regulations on cryptocurrency trading, restrict related activities, or even deem them illegal, which could result in restrictions on investors’ trading, freezing or confiscation of assets.