Are We Witnessing the Return of the Crypto Bulls or a Bear Market Bull Trap?

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Trent Alan

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Trent Alan

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Trent has a background and education in journalism and communications, with two decades of experience editing and writing on a diverse array of topics. In recent years, however, he has shifted his...

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October 23, 2023

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The cryptocurrency market has been on a roller coaster ride in recent months, with Bitcoin and Ethereum prices experiencing significant fluctuations. After a period of relative stability, BTC’s price catapulted by a remarkable 28% in January, leading to liquidations worth more than $500 million as exchanges closed traders’ leveraged short positions.

What a way to ring in the new year. Day 17 of 2023 and nearly $500 million in #Bitcoin shorts liquidated since Friday.

This followed last week's CPI print which was indicative that the Fed may soon be approaching a 'terminal rate'.

— OVEX (@OVEXIO) January 17, 2023

However, some experts are warning that this sudden surge in BTC’s price may not be a sign of a returning bull market and this could be a Bitcoin bull trap.

Bitcoin (BTC) Price Prediction and Technical Analysis: Bitcoin Bull Trap?

One important technical indicator to consider is the 200-day EMA, which is widely used to spot macro market trends. When the price of BTC is above the 200-day EMA, it’s considered a bullish market trend, and when it is below, it’s considered bearish.

Bitcoin has been consolidating around the 200-day EMA for the past four days after trading below it for the past 284 days, before managing to close above the key level yesterday. It’s worth noting that the last time Bitcoin’s price traded above this level was back on March 27 to April 6, 2022, when the market experienced a false breakout.

Given this, traders are advised to wait for a confirmed breakout and bullish EMA alignment before entering positions in the cryptocurrency market presently, and also to exercise maximum risk management.

BTC’s 20-day, 50-day, and 100-day EMAs are currently at $18,660, $17,885, and $18,317, respectively. This shows that the short to long-term trends are bullish, as the current price is above all three EMAs, making this a promising sign that we could get the aforementioned breakout if wider macroeconomic factors allow.

Bitcoin’s trading volume is presently at 22,316K with the volume moving average estimated to be 31,547K. With a few more hours left in today’s session, it seems likely that Bitcoin trading volume will surpass its recorded average–an indication of high investor interest in the cryptocurrency.

With an RSI reading of 88.91, it’s possible that this upward trend could be due to retracement and consolidation before moving further. However, to ensure that traders get the best out of this data during an uptrend, it’s ideal to use multiple indicators with RSI for more precise readings. Traders should keep watch for volume support and look for any divergences which could potentially signal that the current trend is weakening and that this may be a Bitcoin bull trap.

The MACD is also showing bullish signals, however, giving further confirmation of a potential continued bullish move. The MACD is at 1069.59, the signal line is at 593.41, and the histogram is at 476.51. This suggests that the upward momentum is likely to continue.

The current price of Bitcoin is $21,151 with a daily loss of 0.18%. The immediate support levels are at the 200-day EMA at the $21,000 and $20,500 price levels. Immediate resistance levels are at $21,302 to $21,895 and the next resistance levels are at $24,445 to $25,212.

Bullish Trend May Continue but Exercise Caution to Avoid Bitcoin Bull Trap

It is still uncertain whether the current increase in price and sentiment for Bitcoin is the start of a returning bull market or a Bitcoin bull trap. While there has been a significant increase in price and trade volumes, liquidity has not fully recovered since the collapse of FTX and market depth has again started to sink. Additionally, the recent legal troubles for crypto lender Genesis and exchange Gemini may also be impacting the market. Further market observation is needed to determine if this is a sustainable trend or a temporary spike.

In conclusion, the technical indicators suggest that Bitcoin is currently in a strong bullish trend and is likely to continue its upward momentum in the short term if macroeconomic factors allow. However, the RSI and other fundamentals data suggests that a potential reversal may occur in the near future, so investors should exercise caution and keep a close eye on the market to avoid a Bitcoin bull trap.