Daniel was afraid of losing face in front of the crowd. For the past year he has been able to hold his head up high and was considered the toughest guy in the valley. All of that was crumbling down in front of everyone who came to see their champion dominate. He was afraid of the mockery he was going to face. He was afraid of becoming a bully victim all over again. He was afraid he would have to live the rest of his life as the laughingstock of the valley. That psychological fear was very real and something he never had to face. By this point in his life he had matured enough to understand the consequences of his actions. Daniel was fearless in Part I and II, but that was due to ignorance rather than courage.
1. Daniel tried to fight the All Valley Champ on the beach. Fearless due ignorance.
2. Daniel hosed down the All Valley Champ again. Fearless due to ignorance.
3. Daniel antagonized Chozen rather than try to make friends with him, again fearless due to ignorance.
4. Daniel accepted a fight to the death against Chozen, again, fearlessness due to ignorance. Miyagi even had to tell Daniel that it was for real, implying that Daniel thought Sato would step up and referee the match.
5. Daniel threatened the life of Mike Barnes (He said Mike was dead. Implying that he would assassinate Mike after he climbs up the cliff), fearlessness due to ignorance.
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