Capitulation is choosing to sell your assets, or a part of them, at a loss because their price has dropped so much that you’ve lost faith in their ability to recover.

In both traditional stock trading and the world of cryptocurrencies, there’s a fair amount of risk. Prices can be quite unpredictable, and investors often lack guarantees about which way their investments will go.

When it comes to cryptocurrency trading, some argue that it’s even riskier due to the decentralized nature of the market. In a market without a central authority, it’s more susceptible to manipulation or external influences, resulting in substantial fluctuations in the value of crypto tokens.

While most cryptocurrencies have underlying value, it’s important to note that since Bitcoin’s inception in 2009, the crypto world has experienced its fair share of volatile periods and bear markets.

Given the high volatility in the cryptocurrency space, capitulation is more prominent among crypto traders. Sometimes, the value of crypto assets drops rapidly, and investors may lose hope in waiting for a recovery, prompting them to sell at a loss.

This decision to sell, regardless of the extent of the asset’s decline, is what’s referred to as capitulation.

2020 and 2021 have been a rollercoaster ride for crypto traders, especially those invested in Bitcoin. After reaching an all-time high in April 2021, Bitcoin’s price swiftly began to decline. Due to the significant market shift and Bitcoin’s underperformance, many investors opted to sell some or all of their Bitcoin holdings at a loss.

This collective sell-off of Bitcoin contributed to further price drops for the cryptocurrency. Unfortunately, when capitulation occurs on a larger scale, it can trigger additional price crashes in the asset being sold.