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Decryption of the crypto-asset market

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Decryption of the crypto-asset market

Although these three terms may seem loaded, knowing them will improve your knowledge of cryptography.

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Whether we are trading crypto assets or trying to understand how the global crypto market works, it is normal to come across loaded words like capitulation, consolidation, and accumulation. In today’s article, let’s take a look at these three different terms that could mean the same thing but have totally different connotations.


Capitulation

The market capitulation of crypto assets is defined as a period when there is a dramatic increase in selling pressure, investors attempt to sell their crypto holdings into the market, signifying a massive bull capitulation. This leads to a sharp drop in market prices, also marking the end of a decline or a downtrend. Indeed, investors who held back their assets during the panic are unlikely to do so afterwards.

A capitulation phase usually occurs after the market has experienced significant declines in crypto asset prices. However, it is possible that the downturn will take place as investors remain optimistic.

The chronology of a capitulation phase can be as follows:

  • High trading volume accompanied by significant declines
  • Investors lacking conviction exit the market
  • More risk-tolerant investors are replaced and ready to buy at the end of the prolonged decline followed by a dramatic price drop.


Consolidation

Consolidation occurs when a crypto asset swings between trading levels in a well-defined pattern. Consolidation occurs when there is indecision in the market. The phase ends when the price of the crypto asset finally moves below or above the trading pattern. There can be several reasons behind the breakdown of a consolidation pattern, such as news or developments that have a direct impact on the crypto asset or a trend reversal in the overall market.

A consolidation period can last for days, weeks or months. To trade during a consolidation phase, a trader looks for support and resistance levels and then uses them to make buy and sell decisions. During a consolidation phase, price moves zigzag between support and resistance levels. A break above the consolidation zone, or resistance level, is seen as a signal that prices will move higher, and a break below the consolidation zone, or support level, is seen as a signal that prices will move higher. prices will go down. The trader enters the market in the first case and opts for an exit position in the second.


Accumulation

Accumulation occurs when there is a general increase in buying activity for a particular crypto asset. During accumulation, traders increase their position size in multiple trades as they accumulate the crypto asset of their choice.

However, the duration of this accumulation phase can be spread over a long period of time. Indeed, a trader may wish to obtain a better average price on his holdings or may try to reduce the impact of the market on his portfolio. Buying in bulk in the market often leads to price spikes, and traders prefer to spread out their purchases over a considerable period of time to gather information and make secret decisions.

Although three terms are strongly opposed to each other, we can often get confused. A good review is helpful when we want to upgrade our crypto glossary. Stay tuned for more.

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Disclaimer: This article was written by Giottos Crypto Exchange in a paid partnership with The News Minute. Investments in crypto-assets or cryptocurrency are subject to market risks such as volatility and have no guaranteed return. Please do your own research before investing and seek independent legal/financial advice if you are unsure about investments.

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