An economic phenomenon known as “capitulation” occurs when investors lose faith in a specific asset (such as cryptocurrency, stocks, commodities, etc.), giving up their holdings in the market and prompting a flood of sell orders. As a result, the asset price continues to decrease until a bottom is reached.
Also known as panic selling, capitulation transactions are more severe, frequent, and happen faster in cryptocurrency since the market is still very susceptible to media hype and market whale manipulation.
A cryptocurrency market capitulation is typically followed by protracted price consolidation periods or a clear rising trend in the asset price. The market often reacts to excessive volumes of sell orders by increasing the price of a capitulated asset; therefore, the more severe the surrender, the greater the likelihood of a strong comeback.
Although capitulations may be challenging to foresee, they are visible in the asset’s price chart, and a re-entry point is typically easier to spot. For example, the dramatic over 80% price drop that Bitcoin experienced in early 2015 after a protracted bear market in 2014 is a typical illustration of a capitulation period.
