Slow Down – And Understand the True Nature of a Market Crash

Most people believe that strong volatility is a sign of “market failure.” But in reality, that’s not always the case. In many instances, volatility is not a system error – but a liquidity cleansing mechanism. The Truth About Major Crashes From the 57% crash during the 2008 financial crisis to the 34% decline in March 2020, the market has experienced extreme panic phases. The S&P 500 lost more than 50% of its value in 2008. In March 2020, this index plummeted over 30% in just a few weeks as the pandemic erupted. On the surface, it looks like chaos. But deep inside, it’s a process of asset transfer. Assets are moved from weak hands – reacting emotionally – to strong hands – acting based on valuation models and capital discipline. Core Difference: Solvency Retail investors often trade with money needed for daily life. They have a “bankruptcy point” – a loss level that forces them to cut. Meanwhile, large institutions have: Abundant cash flowLong-term visionAbility to withstand drawdowns without being forced to liquidate This liquidity buffer helps them avoid being driven by emotions. The Mechanism Repeats Through Every Cycle

1. Biological Error The human brain is programmed for survival, not investing. When the market panics, the amygdala triggers a “capital preservation” reflex. You sell immediately when risk is overvalued – which is at the bottom. You realize losses when the risk premium is most attractive.
2. The Counterpart Is the Organization Large trading entities do not rely on emotions. They rely on: ValuationCash flowOrder flowLiquidity When retail investors panic and sell at any price for cash, organizations step in to provide liquidity and absorb assets at deep discounts.
3. The Delay Trap Retail investors wait for: Good newsMacroeconomic data improvementMedia confirmation of “safety” But by then, prices have often already rebounded 20–30%. The optimal entry point has passed. If you wait for a “all clear” signal from the media, you are usually too late. Where Are the Real Signals? Prices can deceive you. But the flow of money does not. Dark poolsOptions gammaInstitutional money When fear peaks and institutions start buying aggressively, that’s often the bottom. But What’s Different This Time? Currently, there is a notable paradox: Retail investors believe all assets will “x100,” while many insiders and organizations are selling at record highs. If the market is being artificially sustained, then when that structure breaks, the correction could be significant. Delays only increase the built-up pressure. Never-Old Lessons Markets are not designed to favor the majority. Panic is a mechanism for transferring assets. Liquidity is more important than predictions. Emotions are the most expensive cost in investing. Most Important Don’t try to pick the bottom with emotions. Don’t follow the crowd. Don’t wait for media confirmation. Understand the cycle. Understand the flow of money. Understand your position. The market does not reward the smartest. It rewards the disciplined and those who survive the longest.