Understanding the stages of altcoin price declines is crucial for any investor. Declines typically occur in four distinct phases.
Let’s break them down step by step:
Phase 1: The Rise Before the FallAfter a prolonged price increase, the market enters a volatile phase. During this time, large players (commonly referred to as whales) begin to manipulate prices to their advantage.
Here’s what happens: Prices appear to stabilize but then experience sudden bursts of high activity lasting three to five days. Despite increased trading volume, there is little to no upward price movement. Influencers and so-called “market experts” flood social media, promoting their skills and urging people to buy.
Retail investors (ordinary traders) get carried away by the excitement and start buying aggressively. However, behind the scenes, whales quietly unload their holdings, reducing their risk exposure. This phase can last for several days, often marking the starting point of a general decline. A similar trend has been observed around mid-May in recent years.
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Phase 2: The Illusion of OpportunityAs the decline begins to spread across the altcoin market, many analysts and influencers refuse to acknowledge the bearish trend. Instead, they continue to fuel optimism.
What happens in this phase: Analysts and traders publicly call this a “buying opportunity,” encouraging people to buy altcoins at lower prices. Statements like “Buy the dip before it’s too late!” or “This is the perfect time to get in!” are frequently heard.
Whales continue to sell large amounts of their holdings during temporary price rallies. Experienced retail investors begin selling their positions during brief price rallies to manage risk. This phase typically lasts 10 to 14 days, creating false hope for many investors.
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Phase 3: Panic Sets InAt this point, the market decline becomes undeniable. Optimistic calls for a bull market begin to fade, and fear takes over.
Key events during this stage: Most market analysts stop making bold forecasts, although a few optimistic voices may still persist, albeit with less confidence.
Selling pressure increases, and prices begin to fall continuously. Retail investors begin to feel trapped, realizing that they may have bought at a high price. Some investors hold their positions, hoping for a recovery, while others sell at a loss to limit their losses.
The market opens at lower prices each day, intensifying fear among traders. This phase typically lasts two weeks or more and often culminates in a significant stock market crash.
Panic is spreading rapidly as investors see their portfolios shrinking every day.
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Phase 4: Aftermath and ReconstructionThe final stage is marked by silence. Optimism disappears completely, replaced by frustration and complaints.Here's what happens:No one talks about bull markets anymore.
Retail investors focus on minimizing losses or exiting the market altogether.
Altcoins are trading at consistently low prices, testing their lowest levels repeatedly. Weak projects are seeing minimal activity, while stronger projects are showing slight stabilization.
When altcoins start to decline without following broader market trends, it is often a signal that the market is preparing for a change.
This phase typically lasts for several weeks or even months. Once the market finds a solid low, it can signal a new cycle, providing opportunities for informed investors to build positions.
Final ThoughtsUnderstanding these phases can help you avoid emotional decisions during market downturns.
Instead of chasing unrealistic forecasts or reacting out of fear, focus on analyzing market conditions and waiting for the right opportunities to enter.
Patience and preparation are the keys to long-term success in crypto investing.