Imagine waking up to find your favorite token down 70% overnight. In moments like this, emotions don’t just spike - they become a second order book spinning in front of your eyes. But professionals know: panic isn’t analysis; it’s a signal to act. A token’s sharp drop always has mechanisms behind it. Some whales are offloading massive positions, some react to news, and liquidity that was thin yesterday vanishes even faster today.
For a trader, every order, every candle, every on-chain movement is a signal that can be decoded - if you know where to look. It’s not just red and green charts; it’s a living market organism that breathes, reacts, and exposes its weak points. While most see only loss, the professional sees opportunities: zones for averaging, hidden supports, and moves by major holders.
Mechanics of a Drop - From News to Panic
Sometimes the market crashes so fast, it feels like someone pulled a lever. Every candle reacts to emotions, strategies, and hidden signals from big players. Let’s break down what really happens when a token drops 70% overnight:
1. Removal of Liquidity by Market Makers
The drop often starts quietly. Large support orders disappear from the order book, and spreads begin to widen. This means the market maker is no longer holding the market, and any sale can push the price down.
For a trader, this is the first cold signal. They notice the market depth thinning - previously there were $500K orders at a level, now only $30K remain. This indicates that a major player is preparing to exit, but wants to do it quietly.
2. Coordinated Dump by Large Holders
The next step is a synchronized movement of big wallets. Several top addresses start offloading the token into the market. When these sales hit visible levels, algorithmic bots begin to copy the movement, amplifying the pressure. The price drops not because of “mass panic,” but because the market can’t absorb such volume without matching orders.
At this point, a trader doesn’t think about profit - they analyze whether this is a temporary dump or the start of a capitulation cycle.
3. Information Trigger
News usually arrives after the movement. When the chart is already falling, someone publishes: “Project team withdrew funds,” “Exchange suspended withdrawals,” “Developer left the project.” This sparks the second wave. People who haven’t sold yet start panicking.
A trader senses it physically - the chart is collapsing, the order feed is burning red, and you realize: this is the start of panic.
4. Cascade of Liquidations
When the price breaks key levels, stop orders and liquidations trigger. On derivatives, shorts and longs get liquidated, and liquidity evaporates in seconds. Traders see the price literally jump $100 down in milliseconds. Algorithms are just cleaning everything out. Anyone trading with leverage exits at break-even or a loss.
For professionals, this is a moment of cold calculation: close some positions, place limit orders, or wait for the final crowd capitulation.
5. Rationalization and Action
Once the dust settles, the market freezes. Volumes drop, leaving only those who understand what to do. A trader opens the volume chart, checks where key stops were hit, and sees where large orders went through.
The goal is to identify the level where “all the weak hands are out.” If the project is viable, gradual position building begins - not with emotions, but with numbers. If not, they lock in what’s left and exit, because in this business, the goal is to survive.
Trader’s Moves During a Market Meltdown
When the market is crashing, news turns into noise, while real signals come from blockchain data and the order book. A professional’s strategy is built precisely on these signals. Here’s a step-by-step plan of what a trader does in such a situation:
1. Opens the Order Book, not X
The first thing a trader sees is liquidity. It shows where the price can stabilize and where any movement can trigger a sharp drop.
Checks the depth of the order book and the activity of orders.
Evaluates entry and exit points without significantly affecting the price.
Analyzes Market Making Programs.
2. Checks On-chain activity
Next, the trader examines token flows on the blockchain to understand who is actually moving the market.
Tracks large transfers of the “whales” and liquidity pool activity.
Identifies mass withdrawals and liquidity distribution.
Determines where algorithms stabilize the market and where manual interventions occur.
Concludes whether the drop is chaotic or controlled and estimates its impact on future movements.
3. Analyzes Volumes and Order Density
After a sharp drop, the trader focuses on support and resistance zones rather than the current price.
Identifies high-density limit order areas where the price may pause.
Monitors unusual movements of large wallets and pools.
Determines safe entry and exit points based on real volumes.
4. Recalculates Risk Profile and Adjusts Positions
The trader reviews the portfolio and adapts strategies to the new market conditions.
Calculates the current PnL of each position.
Determines zones for averaging at key support levels.
Partially closes positions where margin risk is high.
Sets stop-loss and limit orders for quick response to further fluctuations.
5. Monitors Recovery and Market Dynamics
After the drop, the trader’s attention is fully on forming new levels.
Tracks new liquidity clusters and the speed of their formation.
Observes actions of large holders: taking profit or averaging back in.
Monitors spreads and the formation of market depth.
Compares movements across other pairs and assets to forecast next steps.
Evaluates trading volumes and speed to identify safe entries or further averaging opportunities.
Conclusion
On the crypto market, you either catch the moment, or it sweeps you away. Experienced traders simply spot where people are panicking and take advantage of it. The irony is, the scarier it gets for everyone else, the more appealing it is for those who can stay cold. So the moral is simple and obvious: the market isn’t about feelings, it’s about reactions. And if you want to stand firm - you need to learn not to be part of the herd.