Bitcoin Bull Trap: Bears Begin To Dig Claws Into Crypto Trend

Tony "The Bull" Severino

Last Updated: June 11, 2024 7:44 am

3 mins read

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Bitcoin price is on the rebound, but after such a sharp fall and more than 50% retracement, any reversal must be considered a potential bull trap until much higher prices are reclaimed.

Further adding credence to the theory of a potential bull trap, a trend strength indicator very clearly shows that bears are in charge, and are ready to bring out the claws if needed to swat crypto prices back into hibernation mode.

Only Up Season Is Over: Bears Now Control Bitcoin Trend

After such a strong year for bulls in 2020 and a even more powerful start to 2021, expecting “only up” in crypto isn’t uncommon. That’s exactly why the selloff in May was so severe – few saw it coming.

Technicals warned that something violent was coming, but because sentiment was so bullish the bearish signals were ignored. But technicals are rarely wrong so long as a certain set of rules are followed.

For example, the Average Directional Index is a trend strength measuring tool that commonly reads alongside a Directional Movement Index. Simply put, the ADX measures the trend and the DMI says who is in favor: bulls or bears.

Trend changes are extremely clear on the three-day chart | Source: BTCUSD on TradingView.com

In the chart above, there’s no denying the bears are still fully in control of Bitcoin, despite the short-timeframe showing from bulls. Dating back to the start of the bear market, the ADX and DMI have provided reliable signals about which side of the trade is most dominant.

How To Read The ADX And DMI To Gauge Crypto Trend Strength

The chart above also shows the DMI- falling below the ADX, which is an indication that the trend is growing in strength. Falling below a reading of 20 tends to reset a trend and signal its end.

All signs suggest that bears only now have control over the top cryptocurrency by market cap for the first time since April 2020 and aren’t likely to let go so easily.

Could there be several bullish divergences before a reversal? | Source: BTCUSD on TradingView.com

On shorter timeframes, the ADX reached a reading of 70 showing just how powerful bears have been. The trend strength matches the initial power that pushed Bitcoin to above $14,000.

From there and above, with each successive local high, the daily bull trend weakened until bears finally made their attack. Each divergence in the chart above shows the trend weakening in action. It also could suggest that bears might have several weakening peaks with deeper lowers before any sort of real reversal is on the table.

For now, the recent rally in Bitcoin to back above $40,000 might be little more than a bull trap set by playful bears just out of hibernation.

Featured image from iStockPhoto, Charts from TradingView.com

Tony "The Bull" Severino

Tony "The Bull" Severino, CMT, is a distinguished figure in the cryptocurrency analysis sector, renowned for his in-depth technical expertise and innovative approach to market trends. As the Head of Research at NewsBTC, Tony leads a team dedicated to providing cutting-edge insights and forecasts, helping both novice and experienced traders navigate the complexities of the crypto market.
A seasoned Chartered Market Technician, Tony's prowess in identifying and capitalizing on market patterns is unmatched. His academic and professional journey in market analysis has firmly established him as a leading authority in technical trading strategies. Tony’s approach is heavily influenced by the principles of Elliott Wave Theory, a method known for its rigorous assessment of investor psychology and price movements.

Beyond his role at NewsBTC, Tony is the visionary founder of CoinChartist.io, an educational platform aimed at demystifying the nuances of cryptocurrency trading. CoinChartist.io serves as a valuable resource for traders seeking to enhance their technical analysis skills. The platform offers a range of learning tools and resources designed to empower traders with the knowledge to make informed trading decisions.

In addition to his educational initiatives, Tony is a prolific author and a dominant voice in the crypto community. He writes the CoinChartist VIP newsletter, a weekly dispatch that has become a staple among crypto enthusiasts, revered for its insightful analysis and actionable trading advice. This newsletter has consistently ranked as a best-seller on SubStack, boasting thousands of subscribers who rely on Tony’s expertise to guide their trading strategies.

Tony is also celebrated for his literary contributions to the field. He is the author of the highest-rated Crypto Trading Journal on Amazon.com, a testament to his ability to communicate complex trading concepts in an accessible manner. This journal is widely regarded as an essential tool for traders aiming to track their progress and refine their strategies.

Before his ascent in the financial analysis world, Tony honed his skills in journalism. His background in this field has endowed him with a unique ability to present intricate market dynamics in a clear and compelling manner, making his insights highly sought after by a broad audience that ranges from casual readers to professional traders.
His professional affiliations underscore his commitment to excellence and continuous learning. As a partner of Elliott Wave International and TradingView, Tony collaborates with other leading experts to enhance his knowledge and skills. His active membership in the CMT Association further aligns him with the highest standards of industry practices and ethics.

Tony’s nickname, "The Bull," aptly reflects his aggressive and optimistic outlook on the cryptocurrency markets. His forecasts often anticipate significant upturns, earning him a reputation for bullish predictions that have frequently led to lucrative outcomes for those who follow his advice.

In summary, Tony "The Bull" Severino, CMT, is more than just a technical analyst; he is a mentor, educator, and innovator whose influence in the cryptocurrency space continues to grow. His dedication to advancing the understanding of market forces and his commitment to providing high-quality, reliable analysis make him a pivotal figure in the world of cryptocurrency trading.

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