Capitulation defines the process of selling any given asset such as cryptocurrency at a significant loss when all hopes of a reverse price action cease to exist. Since the cryptocurrency markets are always subjected to higher volatility, capitulation is more likely to occur with traders of this asset class.

Once the cryptocurrency starts to underperform, it leads to several investors squaring off their portfolio, while selling huge portions of their holding. This, in turn, results in a further price drop. Once capitulation starts to occur on the global level, it can completely eradicate the market, bringing the price down to many folds resulting in a severe market crash.