Bitcoin (BTC) has entered an aggressive downtrend after facing rejection at the 200 day-moving average. When the price shot up above the 200-day moving average, a lot of retail traders got very excited and entered long positions. They were soon shaken out in a brutal stop hunt as the price crashed to $8,446. We can see that it recovered slightly from that level but it is now eyeing further downside again. If BTC/USD declines again, it would be expected to fall much harder to potentially make a lower low. At this point, the probability that a new bullish cycle would start from here is very low. That being said, until and unless we have a decisive break below the trend line support shown on the chart, we have no reason to be overly bearish either.
It is pertinent to note that during times like these when the stakes are so high, fair play should not be expected. We can expect all sorts of manipulation and misleading moves near term to lead traders into thinking this might be the beginning of a new bull run. The aim here is to trap in as many bulls as possible on the halving FOMO. The upcoming halving is going to be one of the worst bull traps in my opinion. Everyone is hoping that the price will shoot up before the upcoming halving and we have seldom seen “everyone” being proven right in financial markets. The most probable scenario is that we might see a major crash before the next halving. This would be similar to how the price crashed during the Bakkt hype.
We can see on the daily chart for BTCUSDShorts that the number of shorts has rallied recently. If the price trades sideways for long, we could see the number of shorts increase to test the 200-day moving average. After that, the number of shorts would decline which usually coincides with a decline in the market. The BTCUSDShorts indicator from Bitfinex used to serve a different purpose than it does now because now it can better used as a tool to track how and where the major players might be “claiming” their short positions.
Bitcoin (BTC) and the rest of the market is still in serious trouble. Until and unless we have a break and close above the 200-day moving average with a sustained uptrend seeing higher highs and higher lows, we can rest assured that a sharp decline is in the offing, one that would hit Bitcoin (BTC) hard but it would hit altcoins even harder. Investors in the altcoin market have yet to see any real pain because it has become far too easy to be bullish on all sorts of coins in this market. There is a good chance that we might see an across the board cleansing in this market before the next bullish cycle begins. At this point, it is simply not worth the risk/reward to be bullish on the market.
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