What is Capitulation

Capitulation is the action of selling your assets whilst their value is going down in disbelief that their price will increase again. This usually happens most during periods of market correction, causing some investors to sell in fear.

Capitulation in cryptocurrency markets happens because cryptocurrency is highly volatile. This results in two different patterns of behavior by investors. Some sell their tokens at a loss, unable to endure the uncertainty and the psychological pressure associated with holding on to the coins while waiting for hopefully the price to go up again. Other experienced investors perceive price drops as an opportunity and the right time to purchase assets. Driven by the logic that only buyers remain because all those who intended to sell their assets have sold them already, these investors believe that prices will likely go up again, thanks to immense purchases by interested buyers later.

Technical analysists study candlestick charts to locate capitulation, that is likely followed by a reversal and increase in asset prices. While sizeable purchases lead to increase in prices, considerable sales lead to the decrease of the asset’s value.