Definition ∞ Trader capitulation refers to a market phase where investors abandon their positions, often selling assets at a loss, due to extreme fear or a complete loss of confidence. This occurs during sharp market downturns when selling pressure becomes overwhelming, and even long-term holders liquidate their assets to avoid further losses. It is typically characterized by high trading volumes and significant price drops, marking a potential bottom before a market recovery. This behavior reflects a widespread psychological shift among market participants.
Context ∞ News reports frequently mention trader capitulation during severe cryptocurrency bear markets, analyzing on-chain data and market sentiment indicators to identify its occurrence. Identifying this phase can be important for market analysts seeking to predict market reversals. It represents a significant psychological event in asset pricing cycles.
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