[Feature] Crypto Price Surge ─ is it a Bull Run or a Bull Trap?

The crypto economy has been bearish for pretty long; cue Terra’s fall, FTX’s implosion, crypto exchanges declaring bankruptcy, companies going on a layoff spree, and more. Then in a week or so, in case you have not been keeping up to date with any crypto-related news, crypto prices seemed to have surged.

This led many to be divided into two major camps: those who think that this price rally is just a bear market bull trap, and others who feel that the crypto bulls are finally returning. First, what is a bull trap? It is deemed as a bull trap when an asset’s price rises above a resistance level and in turn, baits in buyers. The buying trend is usually short-lived with the price possibly tumbling shortly. The “bulls” who bought in as the price was breaking out to new highs must exit or be slapped with losses as the price reverse course and descends, hence the word “trap”.

The chart shows that Bitcoin (BTC) went over $21,000, a number last seen at the start of last November. At the time of writing, BTC is trading at $20,843.

Source: Tradingview

As for Ethereum (ETH), it was near $1,600, a number also seen at the start of last November. At the time of writing, ETH is trading at $1,530.

Source: Tradingview

Numerous altcoins also saw a hike in their prices.

A massive amount of people have been weighing in on the recent price action on Crypto Twitter: some are calling bull that the bull market is returning, while others express that it is a bull trap and investors should remain wary.

Cointelegraph held a poll on Twitter earlier this week asking users to vote if they think it is a bull run or a bear trap. Out of the 5,000 respondents, a solid 61.2% believe that it is a bull trap. Below are just a handful of the responses or opinions.

One user posted on Twitter the ever-popular “Wall Street Cheat Sheet” and replied to one of the respondents that his disbelief is sarcastic. He went on to explain that he has been hearing a lot of “this is a bull trap” and it reminded him of “this is a sucker’s rally”, and that based on the data he sees, we are at the early start of the next bull market.

Some sources advise traders “to wait for a confirmed breakout and bullish EMA alignment before entering positions in the cryptocurrency market presently, and also to exercise maximum risk management.” The exponential moving average (EMA) for BTC’s 20-day, 50-day, and 100-day EMAs indicate that the short to long-term trends are bullish since the current price is above all three EMAs, which is a good sign that there will be a breakout if “wider macroeconomic factors allow”.

Au contrary, Nicholas Merten, the host of DataDash and a widely followed crypto analyst, informed his over half a million YouTube subscribers that BTC’s price hike this year is similar to its past three relief rallies which were followed by lower legs down. In short, “BTC’s latest bounce is possibly a bull trap ahead of a looming recession”.

“…this is getting to the typical percentage increase that we got during relief rallies and again, I just want to signal that caution.”

No matter which side of the “debate" you are on, it is always wise to exercise caution (or err on the side of caution) and keep a close eye on the market since we are unsure if the recent price rally is due to a returning bull market or simply a bull trap in a bear market.