Bitcoin
Bitcoin Price Drop Likely a ‘Bear Trap’, Says Crypto Expert By Investing.com
The price of continued its decline on Thursday as selling pressure from Bitcoin mining operators, Mt. Gox refunds and actions by the German state of Saxony continued. However, a crypto expert told Investing.com that the ongoing downtrend could be “a bear trap.”
Why is Bitcoin price in a downtrend?
The now-defunct Mt. Gox exchange remains a key issue for the world’s largest cryptocurrency, with the exchange’s curators recently beginning to refund tokens to customers affected by a 2014 hack. The exact amount of that distribution is unclear, but wallets linked to the exchange moved around $9 billion worth of tokens earlier this year.
Additionally, the German government is disposing of Bitcoins confiscated from a piracy website, potentially containing at least $2 billion worth of tokens.
The sharp drop in Bitcoin’s price has raised concerns that major Bitcoin miners may start selling off some of their assets to break even, especially after the Bitcoin halving earlier this year reduced miner rewards.
These factors have weighed significantly on BTC in the recent period, shaving around 15% off its value in the past month.
Cryptocurrency expert weighs in
Bitcoin is currently trading above the $58,000 mark, having bounced off last week’s low of $53,600. The cryptocurrency remains in a technical downtrend from March’s record high of $73,800, with consecutive lower highs at $71,300 and $63,900.
Eugene Cheung, head of institutions at Bybit, said that while optimism remains for the medium-term outlook, the cryptocurrency market is not immune to abrupt macro events that can significantly affect global market sentiments. However, Cheung notes that the $57,000 support level has so far helped sustain Bitcoin’s price, pointing to the market’s resilience and limiting further declines.
“If the price can quickly rise above the 200-day moving average, this recent decline could be considered a bear trap, and a higher rally could be expected,” Cheung told Investing.com.
Historically, market corrections have acted as healthy resets within ongoing bull markets, aligning with well-established trends. Cheung notes that there was a decline in trading activity and cryptocurrency prices on centralized exchanges for nearly two months following the halving event in previous Bitcoin cycles, a pattern that has repeated itself in the current cycle.
“Market cycles can last 12 to 18 months after the Bitcoin halving before producing a new cycle top,” he said. “Despite common fears that ‘this time is different,’ the cyclical nature of markets often sees history not repeating itself, but certainly rhyming.”
Meanwhile, recent data from on-chain data and market analytics firm CryptoQuant offers a different perspective, suggesting that a major Bitcoin price correction or the start of a sustained bear market could be imminent as the P/L ratio hovers around its 365-day moving average. Previous crossovers to the downside preceded significant declines in May and November 2021.
CryptoQuant’s Bitcoin bull and bear market cycle indicator is also approaching a critical level that indicates a possible decline into a bear market.