The fastest way to lose money in the crypto world is to treat a distribution trend as a shakeout opportunity. The more it drops, the more you add to your position, and finally you get trapped and can't move.

Last week, a fan privately messaged me: "I bought coins, and after three days, it dropped 30%. Is this a shakeout? Should I add more?" I looked at the candlestick chart and saw that this is not a shakeout at all; it's clearly the classic rhythm of the market maker dumping their holdings. When I asked further, I found out he had been adding from the halfway point all the way to full position, and now he’s completely stuck.

Over the years, I’ve seen too many stories like this in the crypto space. When a big drop happens, retail investors get excited, thinking it’s a bargain opportunity, only to be chopped down one after another. Today, I’ll clarify how to distinguish between a shakeout and a distribution, so you can avoid detours.

**Market Makers Have Only Two Plans**

First, understand that market makers have a clear purpose when they shake out: to lower their own holding costs while clearing out those retail investors who are not firm.

The routine of a shakeout is like this — they sell some chips at high levels to create panic, then buy back at lower levels. This buy-sell cycle reduces their costs, and those with unstable mindsets are shaken out. When they push the price up later, the selling pressure is much smaller, making it easier to go higher.

Distribution is different. The market maker’s only goal is: how to dump all their chips at high levels and then run away.

In simple terms, a shakeout is to support further upward movement, while distribution signals a market top. Confusing these two can be very costly.

**3 Market Signals for Quick Judgment**

Don’t listen to what the market makers say; watch what the chart does.

**First Signal: Volume Performance.** Shrinking volume and increasing volume are key. During a shakeout, volume shrinks on declines and increases on rebounds. Why? Because the market maker is just scaring people, not really running away. During distribution, it’s different — volume increases regardless of whether the price is rising or falling, and sometimes there are sudden huge volumes during declines, indicating frantic selling. Watching volume can often instantly reveal the nature of the trend.