In the crypto world, the most expensive lessons often come from a simple misjudgment—mistaking a main player's distribution for a shakeout opportunity.

Recently, a friend came to me saying that his holdings had dropped more than 30%, and asked whether he should keep adding to his position. I looked at the chart and felt a heavy sinking feeling—this isn’t a shakeout, it’s clearly the main player offloading. Unsurprisingly, he still chose to buy more, and ended up getting trapped even deeper.

I’ve seen this kind of thing too many times over the years. Flip through major chat groups, and 90% of retail investors’ losing stories all stem from the same core issue: not being able to tell when it’s a shakeout and when it’s distribution. Today, I want to share some of my practical experience accumulated over the years, hoping to help you avoid some detours.

**What’s the real difference between a shakeout and distribution?**

On the surface, both involve prices dropping, but the underlying logic is completely different.

A shakeout is actually the main player doing preparatory work. They want to push the price higher, but their chips aren’t yet concentrated enough, and there are still too many retail investors. So they artificially create panic, scaring retail investors into selling their low-cost chips, while also raising the holding costs of those who stay. This way, when they push the price up later, there’s less selling pressure.

Distribution, on the other hand, is different. The main player has already made enough profit and has sold all they want. Now they aim to offload their high-cost chips to the next sucker and then exit completely. Once distribution begins, the coin basically has no room to rise.

The most tricky part is that these two processes look exactly the same at first—both involve a decline. But the difference determines whether you can buy at the bottom or get caught chasing a high.

**Three tips to see through the main player’s intentions**

*1. Trading volume speaks the truth*

During a shakeout, trading volume usually isn’t very thin. In fact, at key points, volume may even spike because the main player is quietly accumulating, actively taking orders at low levels.

In contrast, during distribution, as the price falls, trading volume gradually shrinks. The main player is no longer taking on new positions; they’re just selling off unilaterally. Fewer and fewer people are willing to buy, and retail investors’ power can’t hold up, so volume drops accordingly.

Think of it this way: if the price is falling but volume remains steady, it indicates someone is picking up bargains at the low. If the price is falling and volume is shrinking, it’s a sign that nobody wants it anymore.

*2. Is the support level holding?*

The main goal of a shakeout is to accumulate enough chips within a certain price range. They will repeatedly defend a support level; even if the price dips temporarily, it will rebound quickly. You’ll notice a particular level that consistently bounces back with strength.

In distribution, there’s no need for this. The main player even prefers the price to continue falling, so they can buy cheaper when others panic. Support levels are broken one after another, with little resistance. Every former support becomes as fragile as paper, easily pierced.

*3. Interaction between main holdings and retail sentiment*

During a shakeout, because the price is falling, retail investors are scared and frantic, selling in panic. But strangely, despite the significant decline, there aren’t many extreme bearish voices. Instead, some are shouting “the bottom is in, time to buy in.” This indicates the main player is still in the accumulation phase.

In contrast, during distribution, market sentiment is usually very pessimistic. Negative analyses flood the scene, retail investors collectively bearish, and the market’s emotional state is broken. A series of large red candles on the chart looks like the last straw that breaks the camel’s back.

**Practical judgment sequence**

When I see a coin with a significant drop, my decision process is as follows:

First, check the trading volume. A large decline accompanied by stable or even increasing volume is a good sign.

Next, look at support levels. Is there a level that’s repeatedly defended, with rebounds each time it’s touched? If yes, it indicates the main player’s intention.

Then, assess market sentiment. Are retail investors panicking or selectively bearish? Are there still voices encouraging to buy the dip?

Finally, consider the fundamental and market cycle. Has any negative news been digested? Is the technical chart already at its limit?

By combining these dimensions, you can usually achieve about 70-80% accuracy. Of course, it’s not 100%, but it can at least help you avoid the biggest pitfalls.

The most painful thing in the crypto space is that sometimes, no matter how well you analyze, human greed can override logic. I’ve seen too many people knowingly see distribution but still desperately try to buy cheap, only to get trapped for years. So, besides mastering these judgment skills, managing your mindset and executing proper stop-losses are sometimes even more important than analysis itself.