BULLS CLIMB THE LADDER 🪜, BEARS JUMP OUT OF THE WINDOW 🪟
Let's understand this theory first.
Whenever I see people saying "this coin went from 2K to 3K in 10 days, but went down to 2.4K from 3K in just 48 Hours" makes me realise how an avg investor is still unaware how pump & dump works in this market. And the adjectives like "crazy, bizarre, weird" defines the level of uncertainty.
In fact the principle is the same in whichever capital market you go to, be it stocks, crypto, commodity or forex. It's the volatility that separates crypto from others.
Coming back to the theory, let's consider the crypto market. The idea is that the market rises slowly while the downturns are sharp and fast. Whenever a bull market comes into action, the prices go up. The price can be high, but if a market is illiquid, a small amount of money can still push the price around. But the price to go up significantly needs more push from investors and more liquidity.
This doesn't happen in a jiffy and a slow process. And then there are profit takers who are waiting to scoop a big chunk when the price hits a high. As a result the price comes down, takes a deep breath, stabilizes and then continues its upward journey. Stability is determined more by the liquidity of the market (how many people are willing to buy and sell at any price point), than the price of an asset.
Now coming to the bears, and the latter is just opposite of the former. You've bought the rumour, now it's time to sell the news. Negative news triggers a sell off like a wildfire. That is the point when buyers get outnumbered by sellers badly with huge liquidations and steep decline in prices. And as the sellers (whales, insiders) rush to grab the most out of their investment, the price falls rapidly.
Retailers face massive liquidations with leveraged money which takes the price to hit a rock bottom. This "LEVERAGE" thing too plays a big role in taking down the price rapidly.
So, the next time someone compares the speed of rise and decline, you explain this simple concept.