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VOLATILITY , CAPITULATION, PUMP & DUMP and BAGHOLDER EXPLAINED | Crypto Jargon #20 - YouTube
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Welcome to Crypto Jargon,
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in this episode, I break down the terms
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in relation to cryptocurrency trading
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Let's start with what do we mean by "Volatility".
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You've surely heard it many times,
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that cryptocurrencies are very volatile.
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This refers to instability in their prices.
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Cryptocurrencies can experience significant price variations
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in short periods of time.
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On many occasions,
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their value can change by 100%-200%
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and even more than 400% in a single day.
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With the exception of stable coins of course.
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But this is also the appeal
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of this new asset class to investors and especially,
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to the speculators who trade them on exchanges.
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Hence, a sudden increase of the price
of significant levels
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is known as a "pump"
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it can be a result of advancements and development
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of the tech of a coin or a major event
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such as a big exchange listing, a change in the protocol,
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halving, a hard fork and many others.
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which brings a lot of attention from buyers
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who rush into a buying frenzy
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and the prices shoot up.
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but this could also be a coordinated effort
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to increase the price artificially,
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for purely speculative purposes.
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so, during a Pump,
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digital assets can jump in value exponentially,
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by a few hundred percent in a single day
or even just in hours.
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The faster this process occurs,
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the more it signals for manipulation
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and in such cases it is often followed by a sudden drop,
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a process that can occur even faster
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and it's known as a "Dump"
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this is when the selling pressure overpowers the buyers
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and supply becomes disproportionate to the demand,
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crashing the prices to the previous lows or even worse.
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The two events are often interlinked
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and this is what we mean by a Pump and Dump (P&D)
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In fact, most of the "pump' n' dumps" in crypto
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are results of coordinated efforts by
groups or individuals
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with malicious purpose of falsely inflating prices
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of a coin for personal gains.
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This is a practice that is illegal in traditional
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stock markets but still largely popular in the crypto space.
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Such is the case with the Fash Pump and Dump.
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which happens ultra-fast and lasts a very short period
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typically within a few minutes
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and is organized by Pump and Dump groups
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that thrive on Telegram, Slack and other online channels.
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These are groups of traders
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who invest heavily in a cryptocurrency at a very low price level
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and then publicize it aggressively,
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often using misleading or outright false statements
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to get other investors interested
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and drive the price upward.
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Once that happens, and the prices are shooting up,
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the group sell off their coins in bulk
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which results in a profit for them,
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but it creates a huge drop in the coin's value
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due to other traders panicking about the falling prices
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and selling off their positions as fast as they can.
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We call this a ripple effect
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and it catches on really quickly and creates the huge "dump".
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After this event,
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the price usually retracts to previous lows
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or even below,
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and it creates many bagholders.
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a Bagholder, one word,
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it's a term describing an investor
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who holds large amounts of a coin
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that has decreased in value so much,
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it has become worthless.
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It is often used for those who bought during high peaks
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but held-on to their coins for too long,
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resulting in losses when the currency
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came crumbling down.
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Eventually, they might give up
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on their hope for recovery
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of their investment and "Capitulate".
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CAPITULATION
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This is to sell-off at a loss.
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A Closure or a period of strong selling activity,
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where investors give up their positions
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and sell-off their holdings.
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It can be referred to as panic selling
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because during a period of capitulation,
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sell orders peak at a much higher-than-average level,
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which quickly drives the asset price
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lower and lower in a frantic manner.
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Capitulation can be described as the moment
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when investors lose hope
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accepting losses
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and giving up on their previous gains.
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When the panic-selling period is over,
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marking the end of the capitulation,
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it may be followed by either a consolidation
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which is sideways price movement period
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or even by an upward trend
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that would potentially indicate the beginning
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of another bull market.
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As you know, markets go in cycles
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and it is not unusual for coins to loose up to 90%
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of their value
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during the period of a bear market
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and gain it all back again during the next bull market.
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Bull market and Bear market terms are covered in another episode of Crypto Jargon
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so take a look in the description of this video
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where you will find the link to that.
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Enjoying this content?
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Go check out Crypto Jargon: The eBook
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out now on Kindle
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it's an Amazon bestseller
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and it's the most up to date crypto dictionary
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with more than 700 terms, acronyms and trading slang
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related to cryptocurrencies and blockchain tech.
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just go to ojjordan.com/cryptojargon
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and grab your digital copy today.
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