Time-based capitulation

Time-based capitulation refers to a phase in the financial markets where prices remain relatively stagnant due to investor apathy and disinterest, rather than due to any specific news or fundamental changes. This phase is characterized by lack of excitement and low trading volumes, leading to sideways price movement. Experts use the term to describe periods where the market has already experienced significant selling pressure (price-based capitulation), and now it transitions to a phase of boredom and disinterest.

Ryan Sean Adams and David Hoffman, hosts of the Bankless, discuss this concept frequently. They explain that after a major price drop and deleveraging, the market enters this time-based capitulation where there's little movement because most short-term traders have exited and only long-term holders remain. This results in a flat market absent of exciting large moves in either direction 1.

Hoffman likens the current market phase to past experiences, noting that this boredom-driven downturn can last a significant time before a new bull market begins. He recalled the 2018-2020 bear market where a similar pattern occurred, with initial recovery followed by a prolonged period of low activity and flat prices 2. This period tests the patience of investors, as there's no dramatic price action to react to, leading some to eventually "capitulate" out of boredom by selling their holdings and leaving the market 1.