Why Bitcoin’s Recent Price Surge Could Be a Bull Trap?

After Bitcoin managed to hold more or less above the $24,000 level over the past week, more analysts looked for signs of a continuation of the uptrend. However, a closer look at the market data suggests that the recent spike in Bitcoin’s price could be more of a potential bull trap than a sustained uptrend.

According to the digital currency report, a digital currency analyst with the nickname Stockmoney Lizards (Stockmoney Lizards) in the field a tweet It has investigated the reasons for the recent increase in the price of Bitcoin. When asked if the fifth Bitcoin bull market has begun, he says that typically the investment cycle in Bitcoin consists of 4 stages:

Having
bull market
bear market
Accumulation

StockMoney believes that the halving event was the biggest trigger to start a potential bull market to date; Even if other analysts have questioned its importance. In general, halving increases the price of Bitcoin by reducing supply and increasing demand (scarcity). Therefore, it makes sense to wait for the next halving to increase the price.

In addition, after the closing of the first green candle at the beginning of the bull market, we will see significant price growth for months.

This analyst notes:

What we can say for sure is that we are witnessing a twin bottom pattern, and historically this pattern has been repeated at the lows of previous Bitcoin cycles.

However, referring to the chart below, StockMoney states that Bitcoin is currently in phase D of the Wykoff accumulation pattern. As a result, it is still too early to declare the beginning of an upward trend; Because we have a lot of time before the next halving in March 2024 (Esfand 1402).

Stablecoins are also the anchor point of the money flow cycle in the digital currency market, and Bitcoin and other altcoins are bought using them. While we saw a significant increase in the supply of stablecoins during the bull market of 2021 (1400), their supply has been declining in the recent bear market.

Despite the 45% jump in the price of Bitcoin since the beginning of the year, we continue to see the continuation of the downward trend in the supply of stablecoins.

The Cumulative Volume Delta (CVD) indicator calculates the changes (difference) between the buying volume and the selling volume in a certain time period. A closer examination of this indicator shows that the purchase of Bitcoin using the BUSD stablecoin was the main reason for the recent price increase. Meanwhile, the cumulative delta volume of other stablecoins has had a downward trend in the same period.

It can be concluded that the overbought power of Binance USD in recent weeks has caused the current jump in the price of Bitcoin.

In addition, trillions of dollars of fiat money, especially from China, have recently entered the digital currency market, and as we saw in 2021, the influx of liquidity from the central bank caused the price of assets such as Bitcoin to rise. Noting that the recent bounce is the biggest bull trap it has ever seen, StockMoney expects another price correction in the near future.