Having been involved in the crypto space for years, I often hear retail investors complain and blame the market makers whenever prices drop. They fiercely accuse the manipulators of just eyeing their small holdings.

But that's a big misconception. Market makers' shakeouts are never about plundering retail investors' coins; they are carefully planned setups for the upcoming price rally and distribution.

Take a real case of a small-cap coin—initial price at 1.3U, circulating supply of 12 million coins, with retail investors making up nearly 70%. A private equity firm quietly accumulated 3.6 million coins but kept a low profile without pushing the price up. Why? The logic is simple: if they suddenly drove the price sharply to 1.6U, retail investors would definitely panic sell, and that small fund couldn't handle the sell-off. The end result would be a "pump and crash."

So, how do market makers operate? Usually in three steps.

**Step 1: Gradual accumulation and bottoming out.** The coin's price slowly declines by 2-3% daily, with trading volume dead and no significant news. Retail investors panic, wondering if the coin is doomed, and many start cutting losses and selling. The market maker takes advantage of this by quietly buying 500,000 coins in the 0.95U to 1.0U range.

**Step 2: Sudden dip to trap and buy the bottom.** A sharp drop to 0.75U hits, then quickly rebounds back to 1.0U. Seeing the rebound, retail investors think it's a bottoming opportunity and rush in. But shortly after, the price is hammered down again, breaking previous lows and falling to 0.68U. Those who bought the dip get trapped, ending up with heavy losses and forced to sell.

**Step 3: Use FUD to amplify panic.** Rumors spread that the project team is withdrawing liquidity, large holders are dumping, and even that the team has disbanded. The price crashes to 0.52U, with retail investors losing nearly 60%, forced to liquidate. Meanwhile, the market maker leisurely accumulates 6.2 million coins at 0.5U to 0.55U.

In essence, shakeouts are all about **changing hands**. Market makers clear out the retail investors who vote with their feet and replace them with long-term holders. This way, when they push the price up later, selling pressure is reduced, and success becomes more likely.

Next time you see a sharp drop, don’t rush to curse. It might just be a prelude to a big rally.