Definition ∞ Pre-rally washouts are periods of sharp price declines that occur just before a significant upward price movement in an asset. These events typically involve a capitulation of weaker holders, forcing them to sell their positions at a loss. This purging of sellers often clears the market for a subsequent, stronger price recovery. They are often characterized by high volume selling.
Context ∞ Cryptocurrency news often discusses pre-rally washouts when analyzing market cycles and predicting potential bottoms for digital assets. Reports may point to these sharp drops as necessary resets before a new bullish phase begins. Understanding pre-rally washouts helps interpret periods of extreme market fear as potential opportunities for long-term investors.
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