Capitulation of the crypto market: when the bears take over

When cryptocurrency dips by 30% overnight, investors face a dilemma: to urgently sell their position or to hold and believe in a recovery. If the majority chooses the first option, the dip accelerates, and the market enters a state of capitulation – a period of mass selling when even seasoned bulls concede defeat.

What to Watch for During Capitulation

This phenomenon does not appear out of nowhere. Traders catch it by several signals:

• Sharp jump in trading volumes
• Rapid dip in the rate
• Skyrocketing volatility
• Overbought assets
• Negative background (news, events)
• Outflow of large holders

The collapse of FTX is a striking example: almost all of these signs were present. Low-cap tokens experience wild fluctuations during such events.

Why this is not always bad

The paradox is that capitulation often marks a price bottom. Bitcoin and Ethereum have shown these signals twice in eight years – and both times followed a powerful rise. Remember March 2020: the market crashed, but this marked the beginning of a bull run.

Experienced holders specifically buy at the moment of capitulation, “absorbing” the pressure from sellers and creating a base for recovery.

Where do the coins go

After the mass sell-off, the momentum shifts towards long-term investors. Glassnode data shows that during the bear trend, the volume of cryptocurrencies held for more than 6 months ( “old coins” ) is increasing. This means that short-term speculators have already exited, while patient holders are gradually accumulating positions.

The flip side of the coin: finding the exact bottom is almost impossible. Bitcoin dipped from 2014 to 2016 – two years of slow bottoming. Traders usually focus on historical support levels and previous lows, combining several indicators simultaneously.