Capitulation refers to a market phenomenon where investors lose faith in a particular asset (crypto, stocks, commodities etc.), giving up their positions in the market, leading to massive sell orders. As a result, there is a continuous decline in the asset price until a bottom is reached.
Ironically, market professionals consider these periods of decline a great buying opportunity as prices of assets are sold at lower prices.
What does Capitulation mean in crypto?
Also referred to as panic selling, Capitulation trades in the crypto space is a lot more severe, common, and occur quicker as the market is still highly responsive to media hype and market whales manipulation.
A capitulation in the cryptocurrency market is usually followed by lengthy price consolidation periods or a definite upward trend in the price of the asset. An upward movement in the price of a capitulated asset is typically the market’s response to the excessive levels of sell orders; hence the more drastic the capitulation, the higher the possibility of a strong bounce.
Capitulations may not be easily predicted; however, they are obvious in the asset’s price chart, and a re-entry point is usually more recognizable. A typical example of a capitulation period was Bitcoin’s notable over 80% price dump early 2015 following a lengthy bear market in 2014.