Crypto capitulation refers to a phase marked by a steep downturn in the market, characterized by swift and substantial price drops.
It typically entails panic selling, wherein traders, investors, and speculators hastily offload their holdings due to apprehension about additional losses.
Capitulation sees prices breaching their usual support thresholds, driven by significant sell-offs that drive prices to fresh lows.
Consequently, market sentiment rapidly deteriorates, as the fear of continued losses triggers a cascading effect of selling.
What Causes Capitulation?
In crypto, when people give up and sell their digital coins, it’s usually because of a mix of things happening.
These could be big money news, new rules from governments, or sudden surprises that make investors worried.
Also, when there aren’t many people buying in the market, it’s hard to stop prices from going down because there aren’t enough buyers to balance out all the selling.
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What are the Effects of Capitulation?
When people give up and sell their investments because prices are dropping fast, it can have big effects that last a long time.
This makes other investors scared too, so they sell their investments too, which makes prices drop even more.
This cycle can keep going, making prices stay low for a while. It’s hard to bounce back from this because people don’t want to invest until prices start going up again and things look stable.