With the recent market crash we are seeing all coins BLEED, with the most recent coins such as $USUAL and $BIO standing out, but when will this crash end? To predict this it is extremely necessary to understand the phases of the crash:
Crypto dump phases usually follow patterns that reflect investor psychology and the price influence of large players, known as “whales.” Here are the main phases that can occur during a crypto bear market cycle:
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### 1. Peak Exuberance (Euphoria)
- What happens: Before the dump, there is a significant increase in price, usually driven by strong hype or positive news. (Bitcoin hitting 102k in the last few days)
- Dynamic: Many retail traders enter the market, fearing they will miss out on the opportunity (*FOMO - Fear of Missing Out*). Large players begin to sell their positions gradually.
- Indication: Increasing volume with long green candles.
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### 2. Beginning of the Fall (First Dump)
- What happens: After reaching a top, prices start to fall rapidly, usually caused by large whale sell-offs. This creates panic in the market.
- Dynamics:
- Retail traders start taking losses, trying to get out before prices fall further.
- Prices fall with high volume.
- Indication: Formation of large red candles, breaking of technical supports.
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### 3. Falsos Pumps (Bull Traps)
- What happens: After the initial drop, prices may experience temporary recovery, as if the market has found support.
- Dynamics:
- These "pumps" are often created to attract buyers back into the market.
- Whales take advantage to sell more, increasing selling pressure.
- Indication: Rapid recoveries followed by even greater falls.
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### 4. Capitulation
- What happens: This is the moment of greatest panic, where most investors believe that the market has no way of recovering.
- Dynamics:
- Prices fall sharply, often breaking critical supports.
- Many investors realize losses or abandon the market.
- Indication: Very high volume and sharp drops, often accompanied by massive liquidations of leveraged positions.
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### 5. Consolidation (Accumulation) Period
- What happens: After capitulation, the market begins to stabilize in a lower price range.
- Dynamics:
- Large players begin to repurchase assets at low prices, preparing for a new upward cycle.
- Trading volume decreases, and volatility becomes lower.
- Indication: Sideways movements on the chart, without a clear trend.
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### Tips for Identifying and Surviving Dumps
1. Observe volume patterns: Dumpings are accompanied by abnormally high volumes.
2. Avoid excessive leverage: Rapid declines can liquidate positions before any reaction.
3. Manage risk: Use stops and set exit points.
4. Don’t fall into FOMO or Bull Traps: Be aware of temporary rallies.
5. Track whale movements: Monitoring large wallets can give clues to manipulation. ("Whale Alert" is a great site)
Understanding these phases can help you make more informed decisions during sharp declines in the crypto market.
