Why do sharp declines often occur in a bull market?
This is mainly due to aggressive market cleaning.
In a bull market, retail investors tend to be more loyal and sticky. If they do not experience a sharp decline, it is difficult to wash them out of the market. Sometimes, a series of sharp declines is needed to drive most retail investors to sell and exit.
Some may ask, why is it necessary to clean out retail investors?
Isn't it good for everyone to profit together in the cryptocurrency space?
In reality, it is not. Without new capital inflows into the cryptocurrency market, if retail investors are not washed out, the main players will need to spend a lot of money when driving up the coin price.
Because during the price increase, once retail investors make a profit, they will choose to exit, which significantly increases the resistance faced by the main players, as if the main players are 'carrying the sedan chair' for the retail investors.
If retail investors are washed out through sharp declines and they sell off their positions, the main players can not only realize profits but also benefit from further driving up the coin price later on.
In summary, the reason why sharp declines are frequent in a bull market is the high stickiness of retail investors.
Therefore, if operational strategies are inappropriate during a bull market, the losses faced by retail investors may be even more severe.
