Definition ∞ Holder Capitulation refers to a market phase where long-term investors, or holders, sell their assets at a loss due to extreme fear or despair. This event typically occurs near the bottom of a bear market, signifying a complete surrender of hope among a segment of the investor base. It is characterized by a surge in selling volume from previously steadfast holders, often leading to a sharp, final price drop before a potential market recovery. This behavior is a strong indicator of prevailing negative sentiment and often precedes a shift in market dynamics.
Context ∞ Analysts frequently monitor on-chain metrics for signs of holder capitulation as a potential indicator of a market bottom in cryptocurrency cycles. News reports often discuss whether current market conditions reflect this phenomenon, assessing the conviction of long-term investors. The concept is central to understanding market psychology and predicting potential turning points in digital asset valuations.
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