Definition ∞ A capitulation event occurs when investors abandon their holdings in panic, leading to sharp price declines. This market phenomenon in digital assets is characterized by widespread, indiscriminate selling, often by long-term holders who finally give up hope during a prolonged downturn. It typically results in a rapid and significant drop in asset prices, accompanied by extremely high trading volume and extreme negative sentiment. Capitulation often marks the final stage of a bear market, preceding a potential price stabilization or reversal.
Context ∞ Crypto analysts frequently identify capitulation events using on-chain metrics, such as the Realized Price or Spent Output Profit Ratio, to gauge investor pain. The debate often centers on whether a particular market crash constitutes true capitulation or merely a significant correction. Observing subsequent accumulation patterns by strong holders can signal the potential end of such a bearish phase and the start of recovery.
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