Why do sharp declines often occur in a bull market?
Ultimately, this is mainly due to violent market cleansing.
In a bull market, retail investors tend to have higher loyalty and greater stickiness. If there is no sharp decline, it is difficult to wash them out of the market; sometimes a series of rapid declines is required to force most retail investors to sell and exit. Some may ask, why is it necessary to wash out retail investors?
Isn't it good for everyone to profit together in the cryptocurrency space? In reality, it is not. In the absence of new capital inflows in the cryptocurrency space, if retail investors are not washed out, the main players will need to spend a lot of capital to push up the coin prices. Moreover, there will be selling pressure from above.
Because during the upward process, once retail investors make a profit, they will choose to exit or take profits, which will significantly increase the resistance faced by the main players, as if the main players are 'carrying the sedan chair' for the retail investors.
If retail investors are washed out through sharp declines and they sell off, the main 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 are fundamentally rooted in the high stickiness of retail investors.
Therefore, if the operating strategy is inappropriate during a bull market, the losses faced by retail investors may be even more severe.
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