BULLS CLIMB THE LADDER đȘ, BEARS JUMP OUT OF THE WINDOW đȘ
Let's understand this theory first.
Whenever I hear people saying, "this coin went from 2K to 3K in 10 days, but went down to 2.4K from 3K in just 48 hours," it makes me realize how the average investor is still unaware of how pump and dump schemes work in this market. Terms like "crazy, bizarre, weird" define the level of uncertainty.
In fact, the principle is the same in any capital market, whether it's stocks, crypto, commodities, or forex. It's the volatility that separates crypto from the 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. When a bull market comes into action, prices go up. Even in an illiquid market, a small amount of money can push the price around. But for the price to rise significantly, it needs more push from investors and more liquidity.
This doesn't happen quickly; it's a slow process. Then there are profit-takers who scoop a big chunk when the price hits a high. As a result, the price comes down, stabilizes, and then continues its upward journey. Stability is determined more by market liquidity (how many people are willing to buy and sell at any price point) than by the asset's price.
Now, coming to the bears, the situation is the opposite. You've bought the rumor, now it's time to sell the news. Negative news triggers a sell-off like wildfire. That's when buyers get hit hard with huge liquidations and steep price declines. As sellers (whales, insiders) rush to cash out, the price falls rapidly.
Retail traders face massive liquidations with leveraged money, driving the price to rock bottom in no time. Leverage also plays a big role in the rapid price drop.
So, the next time someone compares the speed of rise and decline, explain this simple concept.#Babylon_Mainnet_Launch #MtGoxJulyRepayments #US_Job_Market_Slowdown #BinanceTurns7 #July_NonFarmPayrolls_Shock