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But in recent weeks, these kinds of price movements are occurring much more frequently. With the combination of new yet concerning consumer data from the U.S., including high inflation rates, together with rising tensions in Eastern Europe, the violent downwards reaction from the broader market does not seem to be out of the ordinary. However, what’s interesting is that asset prices have rebounded in a similar violent fashion soon after.
Bitcoin Historical Volatility Index, Jan 1 - Feb 28, 2022 (Source: TradingView)
As of late, liquidity for major cryptocurrencies such as Bitcoin and Ethereum is running thin, even on large centralized exchanges such as FTX. Could this be the main culprit, or perhaps there is more to the story than meets the eye? It’s time for us to investigate this theory.