Many retail investors have a misunderstanding, believing that the market makers' shakeout is just to collect low-priced chips.
In fact, the more important mission of the shakeout is: to pave the way for the final selling.
If the market maker directly raises the coin price from $1 to $2, it seems time-saving and labor-saving, but it actually hides three major risks:
First, the market will show a "reluctance to sell effect." Investors who entered at low levels have made substantial profits and generally choose to hold their coins, waiting for a higher price.
Outsider funds, facing a short-term doubling increase, are reluctant to chase the high. The market maker raises the price but finds that there are not enough buy orders to support their selling.
Second, the potential selling pressure is highly concentrated.
Once the upward trend pauses, profit-taking will collectively surge, forcing the market maker to use a large amount of capital to maintain the price, ultimately getting trapped at a high position.
The more critical issue is liquidity. Small-cap tokens themselves lack sufficient trading depth, and a rise that has not undergone sufficient turnover often leads to "volume-less increases."
The market maker seems to have substantial paper profits but finds it very difficult to realize large-scale cashing out without crashing the market.
The shakeout precisely solves these problems: through repeated fluctuations and declines, the market maker can not only absorb chips at low levels but also redistribute the market's holding costs.
When early investors stop-loss and exit around $0.9, the cost for new investors entering is raised to the $0.9-1 range.
When the coin price starts to rise again, reaching $1.5, new investors will only have about 50% profit and will not be eager to sell.
When the price breaks through the previous high of $1, technical investors will believe that the breakthrough is established and will rush in.
Thus, the market maker gradually distributes chips during the rise:
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