Bitcoin bull trap signals emerge as BTC rallies above $45K

Bitcoin BTC CryptoVizArt
“Bitcoin IMG_3408” by btckeychain is licensed under CC BY 2.0
  • Bitcoin rally might not be a bull trap, analyst suggests
  • Plenty of bullish signs ahead
  • Bearish indicators

Yerevan (CoinChapter.com) – Bitcoin (BTC) rally at $45,105 in the early Monday session could turn out to be a bull trap. CryptoVizArt, a crypto analyst with a large following, posted his prognosis on the CryptoQuant analytical platform on August 6, when BTC’s bullish momentum showed no signs of slowing down.

The analyst shared indicators that could point to a neutral, bullish, or bearish outcome.

Neutral/Bullish scenario

CryptoVizArt pinpoints the overall sentiment of the Bitcoin futures market as a predictor of upcoming gains for the cryptocurrency. The analyst cites the previous similar period that resulted in increases of over 200 percent in a year. In addition, after the first wave of the Covid-19 pandemic, BTC acted as a hedge against inflation, and the futures market flourished.

The analyst stated that the futures market is currently in recovery. The Funding Rate (FR: blue graph on the chart below) fluctuates at around 0 after a period of negative value. In hindsight, FRs are periodic payments made to short traders (sellers) or long traders (buyers) on the futures markets. 

The recovery period could precede a strong bullish phase.

Bitcoin BTC CryptoVizArt

Moreover, the liquidation on the futures market is rising, which is similar to the past post-Covid situation. The rising Open Interest (the total number of open contracts on a coin; yellow graph) backs the liquidation stats.

The supply and demand dynamic on the market also supports the bullish prognosis. The analyst cited a slow recovery process in the Supply/Demand sentiment, resulting in a strong uptrend. The blue graph at the bottom of the chart below also indicates a decline in all exchange reserves. The outflow of funds from exchanges pinpoints that investors want to hold their Bitcoin rather than exchange it.

Bitcoin, Bitcoin bull trap signals emerge as BTC rallies above $45K

Also read: Bitcoin breakout exceeds over $43K after positive US jobs data

Bitcoin’s Bearish indicators

CryptoVizArt stated that the Active Addresses Count and the Transaction Volume are not following the current price action. The dissonance is indicative of a possible bull trap.

We need to confirm the new players confidence back.

stated the analyst.

While the price rises, the Active Addresses Count declines, as seen in the chart below (purple graph). The on-chain analyst thinks that as long as the active addresses don’t grow in the count, the rally could halt and reverse itself, constituting a classic bull trap.

Bitcoin, Bitcoin bull trap signals emerge as BTC rallies above $45K

The price action still looks confident at the moment. The price in the European Monday session climbed to $45,916 with no bearish tendencies insight.

Bitcoin on a rally. Source: BTCUSD on TradingView.com
Bitcoin on a rally. Source: BTCUSD on TradingView.com

The upcoming sessions will show which route Bitcoin price action takes. At the moment, the indicators listed above have equal merit.

Also read: Chuck Schumer f***ed us all, Cardano founder on the crypto tax bill.

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