One of the most painfully things in the most recent crypto/stocks/everything crash is the huge number of people saying "everything is fine" who are at the same time selling the same things they are publicly hyping. Why do people do this? Why do people not recognize this for what it is?

I think the reason that people do this is often to generate exit liquidity and the reason that people don't understand this practice comes down to not understanding how liquidity impacts the markets.

What is liquidity?

Lets say you have an asset that you want to buy, you have some money aside to buy that asset. In order to get that asset you have to find a seller who is willing to take what you are offering.

What is exit liquidity?

When you have a sufficiently large position it can be hard to find enough buyers to match the amount you want to sell.

In lower liquidity markets being able to sell your entire position for the price you want is not guaranteed. In illiquid markets you might not even have enough buyers to sell at all.

Inverse Cramer