Bitcoin's price over the past week was a scene of panic for many, but also jubilation for some, as it plummeted by over $100 over two days, only to quickly regain half of those losses. The well-prepared trader would have profited from this intense volatility.

The bitcoin price opened the week at $267.09 and closed at $209.63, according to the CoinDesk Bitcoin Price Index. That's a loss of $57.46 or 22% over the seven days.

The biggest story, of course, was the price crash in the first days of the week, when the price lost 37% of its value in two days, hitting a low of $170.21 on Wednesday, 14th January.

The price has been in steady decline since last June, when it was trading just above $600, although a brief rally in November took it above the $450 mark. Since then support for the price has been weak, as it rapidly declined to under $400, and then $300 in December.

By early January, bitcoin markets were left wondering how much further the price could drop. It was now trading under $300, with little sign of improvement in the short term.

The answer came with last week's rapid crash, with one trader calling it "total capitulation". It seems the markets only had an appetite for coins after they had lost nearly half their value on the way down.

One sign of panic selling – or capitulation – in the markets is a spike in total trading volume. That's what we saw last week, as exchanges had their second busiest day ever, with 1.43 million coins changing hands on the 14th January alone. That's about 300,000 coins short of the trading spike in November that took place during a brief price rally.

Exchange owners were left to count their takings during the last seven days of frenzied activity. Exchanges like Bitfinex, for example, charge up to 0.2% for each order executed, with additional 0.1% fees levied on deposits and withdrawals in fiat.

Exchanges don't publish the number of trades executed on their platforms, although volume on Bitfinex over the last week stood at 80,910 coins traded.

Another beneficiary of the volume spike was Kraken, which cracked the top 10 exchanges by total volume for the first time in months, pushing peer-to-peer marketplace Localbitcoins off the leaderboard.

One exchange that will rue the market's timing is Bitstamp. It offered five days of free trading after it resumed service on the 13th, missing a chance to profit from the wave of orders that would peak the following day.

In the wake of the crash analysts were left to figure out what caused it. Pantera was among the first to issue a report with a special newsletter sent to subscribers on the 14th.

The Pantera analysis names margin trading as one of the possible causes for the price decline, pointing to a record high in BTC swaps, used to short the bitcoin price, on Bitfinex.

Pantera also cites the widely held theory that miners are a possible culprit behind the price drop, as those who mine "commercially" have to constantly sell coins to recoup costs and turn a profit.

But the fund also offers two novel explanations for recent price weakness. As Bitstamp was taken offline in the wake of a security breach that saw thieves steal about $5m, bids worth roughly the amount were on its books. These orders were cancelled when the exchange suspended trading. As a result,Pantera says, the bitcoin price didn't have the benefit of these buy orders as its decline began.

The fund also says that a rise in venture capital invested in bitcoin firms may also have meant that funds normally bound for a direct investment in bitcoin may now be diverted into companies working on bitcoin instead. This translates into less capital sloshing through the bitcoin markets.

TechCrunch attempted to perform some analysis on the bitcoin price, observing that as the price declined, the number of transactions on the blockchain peaked.

Alex Wilhelm mused:

"If bitcoin is more popular than ever, what is driving the price down?"

A look at the data on Blockchain shows that peak transactions for the week were recorded between the 14th and 16th of January, with more than 33,000 transactions taking place in that period. This coincides with a peak in exchange trading volume on the 14th, followed by about three days in tapering exchange activity.

The likely answer to TechCrunch's question, then, is that the rise in transactions showed traders pulling their coins off the exchanges after a couple of days of frenzied activity. Meanwhile exchanges themselves were likely sweeping hot wallets as the amount of funds on their platforms swelled.

In other words, it's not that bitcoin's price crashed while it inexplicably got more popular. Instead bitcoin's price is behaving as it always has: moving in tandem with the markets as traders and the wider economy tries to figure out, sometimes painfully, where its true value lies.

Accounting image via Shutterstock