Since there is limited, speculative information on the internet about this, I have decided to answer this the best I can. All I have to go on personally is my 11 years of experience following markets, studying charting and volume mechanics, and my constant fervor to do further research on the subject. Bear with me here, cryptocurrency is new to 95% percent of people, including myself.
First off, let’s begin with what bitcoin is. It is a payments infrastructure built off of computer processors solving a complicated math problem. The length and complexity of the math problem that must be solved is what makes the currency safe. To commit fraud, you’d need a computer that can compute every math problem done within the system since the beginning. Which sounds super safe now, but imagine what our computing power will be in 30 years. In any case, Bitcoin is not the only cryptocurrency available for you to buy. Other popular names include Ethereum, Litecoin, Golem, Ripple and Faircoin.
In any case, there are a few factors that likely contribute to wild jumps. If you go to gdax.com, you’ll see real time transactions: buying and selling 24 hours a day, 7 days a week. What I believe is going on here is various buying and selling schedules encompassing world stock/currency/commodities markets opening and closing, and variations in the volume [speed] of buying and selling as a result. You tend to see cryptocurrencies make big moves toward 8-9pm ET [as of late, as least] as a result of the other side of the world waking up and starting their buying and selling. This is just a personal theory of mine, but it is plausible nonetheless.
Another technical variant would be the opening of new exchanges for Bitcoin, Ethereum, and Litecoin, among other flavors of cryptocurrency. Monday June 19th saw a new market open for Litecoin, allowing for pent up demand to be sated. This would logically result in a price squeeze, as buyers bid up the current limited supply of coins [tokens.] The price ticked up to a new high that day, followed by a slip off in prices that were likely profit taking.
Another factor that can push up a cryptocurrency is outside investment in the infrastructure itself. Ethereum, Bitcoin’s hot younger cousin saw its price shoot up from about $45 in March to over $400 per token in June, due to a large publicly announced investment by Microsoft, Intel and JP Morgan among other big names. I’m still not sold on the price moving up on hype after these kinds of announcements, but they’re equally hard to disprove.
This brings me to my last part of theory, which is volume variations. If Microsoft, Intel and JP Morgan invested in Ethereum, it was probably not a few thousand dollars. It was more likely millions of dollars. This will squeeze the price up, because quantities of Ethereum tokens are finite. A multi-million dollar purchase by a few dozen major corporations will result in a huge chunk of Ethereum being sucked out of the market, making the quantity available to buy more scarce, squeezing up the price. Keep in mind new tokens are perpetually being created so the supply is always growing.
Now, why do huge downswings happen? Every so often a cryptocurrency will need a ‘hard fork’ – a need to reset the clock on the progress of the infinite math problem computers on the network are solving. This instantly vaporizes any value added to the network dating back to whatever date that some type of fraud may have been committed, in order to ensure 100% security. When a cryptocurrency needs to have its clock ‘rolled back’ – that is called a hard fork.
It is also important to remember that these cryptocurrency networks are being used for transactions, not just for wide-eyed gambling and speculation. Also as previously mentioned, new tokens are constantly being created, increasing supply, necessitating a dilution in price.