Why do bull markets often experience sharp declines?
This is mainly due to violent market washing.
In a bull market, retail investors tend to have higher loyalty and stickiness. If there are no sharp declines, it is difficult to wash them out of the market; sometimes, consecutive sharp declines are even needed to force most retail investors to sell and exit.
Some may wonder why it is necessary to wash out retail investors?
Isn't it good for everyone to profit together in the cryptocurrency space?
In reality, it is not the case. Without new funds flowing into the cryptocurrency space, if retail investors are not washed out, the major players will need to spend a lot of money when pushing up the coin price.
This is because during the price increase, once retail investors are in profit, they will choose to exit, which significantly increases the resistance faced by the major players, as if they are “carrying the sedan chair” for the retail investors.
However, if the retail investors are washed out through sharp declines and they cut their losses and exit, the major players can not only realize profits but also facilitate further increases in coin prices later on.
In summary, the frequent sharp declines in a bull market stem from the high stickiness of retail investors.
Therefore, if the operational strategy is improper during a bull market, the losses faced by retail investors may be even more severe.
