Is Bitcoin’s Surge to $110,000 a Bear Trap?

Bitcoin Faces Resistance at $110,000: Rally or Bear Trap?

Bitcoin (BTC) recently surged, reaching $110,500 amid an auspicious market sentiment. However, multiple bearish divergences across various timeframes are raising concerns among traders about the sustainability of this bullish momentum.

Technical analysts are currently observing significant divergence signals on the 15-minute, one-hour, and four-hour charts. This indicates a troubling scenario where Bitcoin’s price continues to climb while momentum indicators, such as the relative strength index, decline. Such discrepancies often suggest weakening buying power, making a near-term pullback increasingly probable.

Market Signals and Economic Influences

Looking at the day-to-day performance, a sobering picture emerges. A pronounced bearish divergence was noted back in May at Bitcoin’s last all-time high of $111,800. Since then, the price has seen fluctuations, briefly dipping below the $100,000 mark, but the bearish divergence has persisted, hinting at unrelenting selling pressure. Immediate targets lie between the $107,500 and $106,000 levels.

This bearish sentiment was exacerbated following the release of the US Non-Farm Payroll (NFP) data, which came in hotter than anticipated. While the report initially served to buoy Bitcoin towards the $110,000 mark, bulls struggled to maintain the momentum, leading to a rejection at this crucial psychological threshold. This pattern often signifies exhaustion among buyers at peak levels.

Interestingly, the perpetual futures funding rates have remained neutral, according to analyst Vetle Lunde of K33 Research. As Bitcoin grazed its all-time high range, the flat funding rate indicates a lack of aggressive long positions, implying that many traders are skeptical about a lasting breakout. This sentiment aligns perfectly with the identified technical divergences.

Trading Strategies and Market Behavior

As Bitcoin hovers just below the $110,000 resistance level, traders are divided regarding the next potential move. Some, like pseudonymous trader Byzantine General, suggest that Bitcoin may be setting the stage for a breakout above $112,000, citing futures data indicating a potential increase in open interest alongside price rises. In contrast, the order books indicate mounting sell pressure, with a high concentration of sell volume around the $110,000 range.

This uptick in selling behavior typically signals that investors are closing positions in light of resistance. The recent patterns echo earlier behaviors seen near past all-time highs, where rejections often occur as traders aim to secure liquidity.

Additionally, trader KillaXBT highlighted Bitcoin’s tendency to execute liquidity sweeps just above resistance and below support levels before reversing quickly. Such price manipulations often aim to force out leveraged positions, paving the way for subsequent directional movements.

Uncertainties surround whether Bitcoin’s ascent to $110,000 is a genuine prelude to future gains or merely a bear trap, designed to mislead traders before an inevitable decline. Understanding these dynamics is essential for those invested in or considering exposure to Bitcoin.

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