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Bitcoin Price Drop: Is It Just a Bear Trap?

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bitcoin price drop

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Table of Contents

  • Learn how a bear trap lures investors into selling short on Bitcoin
  • Explore the impacts of Mt. Gox refunds, German government sales, and Bitcoin mining dynamics
  • Eugene Cheung discusses the resilience of Bitcoin’s market despite recent challenges

Bitcoin’s price dropped on Thursday due to selling pressure from miners, Mt. Gox refunds, and Saxony. However, a crypto expert told Investing.com that the downtrend could be a bear trap.

What is a Bear Trap?

A bear trap is when the price of a financial asset seems to be on a steady decline. This makes investors think it’ll keep dropping, so they sell short to profit from the downtrend. But then, instead of dropping further, the price suddenly reverses and goes back up.

What’s Causing the Bitcoin Price to Decline?

The now-defunct Mt. Gox exchange is still a big issue for the world’s largest cryptocurrency. The exchange’s trustees recently started refunding tokens to clients affected by a 2014 hack. It’s unclear exactly how much was distributed, but wallets linked to the exchange moved about $9 billion worth of tokens earlier this year.

In addition, the German government has been selling Bitcoin that it seized from a piracy website. They might have at least $2 billion worth of tokens.

The sharp drop in Bitcoin price has led to concerns that some major Bitcoin miners might sell some of their holdings to break even. This is particularly true after Bitcoin’s halving earlier this year, which reduced miner rewards.

Crypto Expert Weighs In

Bitcoin is trading above $58,000, bouncing from last week’s low of $53,600. The cryptocurrency is still on a downward trend from its record high of $73,800 in March, with lower highs at $71,300 and $63,900.

Eugene Cheung, head of institutions at Bybit, said that while there’s still optimism for the medium-term outlook, the cryptocurrency market isn’t immune to sudden macro events that could greatly impact global market sentiment.

Cheung says that the $57,000 support level has helped keep the Bitcoin price from dropping. This shows that the market is strong and prices won’t drop much more.

“If the price goes back above the 200-day moving average quickly, this recent drop could be a buyer trap. Then, prices could rise again,” Cheung told Investing.com.

Here’s What We Know About Past Cycles & What’s Going On Now

Market corrections are normal in bull markets. They align with established trends. Cheung notes that trading and crypto prices on centralized exchanges have declined for nearly two months following the halving event in previous Bitcoin cycles. This pattern has repeated in the current cycle.

Data from CryptoQuant shows that Bitcoin’s price could drop soon. The profit and loss index is close to its 365-day moving average.

CryptoQuant’s bitcoin indicator is nearing a critical level that indicates a potential descent into a bear market.

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