A ferrofluid is a liquid which becomes highly magnetized in the presence of a magnetic field. The distinctive ‘spikey’ shape of a magnetized ferrofluid is caused by the need to find the most stable shape in order to minimize the total energy of the system, an effect known as the normal-field instability. The fluid is more easily magnetized than the surrounding air, so is drawn out along the magnetic field lines, resulting in the formation of peaks and troughs. However, the extension of the ferrofluid is resisted by gravity and surface tension. The formation of the corrugations lowers the magnetic energy of the system but raises the gravitational energy and surface free energy. When these forces are balanced, the minimum energy configuration is achieved. Because ferrofluids are very easily magnetized (they have an incredibly high magnetic susceptibility), the peaks can be produced using a small bar magnet.
Source: https://www.magcraft.com/blog/what-is-a-ferrofluid
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