Reflecting on the impact of supply & demand on the crypto-economy nosedive
The crypto economy received a dramatic haircut after the New Year. Although many people expected it, and in the case of the 'non-believers' hoped from it, the drop was the first substantial one in over a year. Prior to this, the market saw it's ups and downs, but always in an upward trajectory.
It is however, important to understand a greater reason for why this swing was so dramatic. Aside from the typically publicised reasons of regulatory clampdowns, all out bans, scams and so on, the fact still remains, a limited supply coupled with a massive swing in demand causes substantial price fluctuations. Up until the New Year, when Bitcoin bounced around a ceiling of $20,000, the supply/demand paradigm had a positive/upward impact on the price. This time around, the exact opposite took place, with speculative crypto traders looking to exit at a high, and shortly thereafter, looking to jump ship as soon as possible.
This, in my view, is primarily what caused the massive 60% dive in the crypto economy. There is no rectifying this phenomenon. This will continue to happen. All market movements, whether sentiment-based or based on facts and metrics, will have an exaggerated impact on crypto pricing. Get used to it...