Why Do Extreme Price Fluctuations Happen in the Crypto Market?
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Bitcoin’s price has been on a seemingly catastrophic and cathartic rollercoaster ride since March of last year, when the price was as low as $3,000 amid the chaos surrounding the pandemic. Interestingly, the asset has successfully surpassed the much anticipated $20,000 ceiling over the past year and gone as high as $64,000 before the fall to the $32,000 range in July 2021.
One of the driving factors behind the wild ride could be the smaller circulating supply of Bitcoin. On-chain data shows that about 18,754,987 BTC in the market are in circulation on July 13, 2021, and the number continues to get smaller as the year progresses.
According to blockchain data assessments, the decreasing supply of Bitcoin drives the price to new heights, as larger investors rush toward Bitcoin as a good store of value. As a result of the recent Bitcoin halving, several Wall Street institutions, including Goldman Sachs, Citigroup, and BlackRock, Grayscale Investment, are embracing cryptocurrencies as an asset class for investments.
However, despite the support from payment giants such as PayPal or the celebrities’ promotion on social media, Bitcoin has recently proven its extreme volatility as the price plummeted by over 40% to as low as $34,000.