The cryptocurrency market has had its ups and downs over the past few months as the prices of Bitcoin and Ethereum have seen significant swings. After a period of relative stability, the price of BTC has reached a remarkable 28% in January. This led to more than $500 million worth of liquidations as the exchanges closed out traders’ leveraged short positions.
However, some experts believe that this sudden increase in the price of BTC may not be a sign of a return of the bull market and could be a pitfall for Bitcoin.
Bitcoin (BTC) Price Prediction and Technical Analysis: Bitcoin Bull Trap?
An important technical indicator to consider is the 200 day EMA, which is widely used to spot macro trends in the market. When BTC price is above the 200 day EMA, the market trend is considered bullish, while when it is below, it is considered bearish.
Bitcoin has been consolidating around the 200 day EMA for the past four days, after trading below for the past 284 days, before managing to close above the key level on Jan. 16. It should be noted that the last time the bitcoin price traded above this level was in the period from March 27 to April 6, 2022, when the market experienced a false breakout.
That said, traders are advised to wait for a confirmed breakout and bullish EMA alignment before opening a position in the cryptocurrency market at present, and also to exercise maximum risk management.
BTC’s 20-, 50-, and 100-day EMAs are currently at $18,660, $17,885, and $18,317, respectively. This shows that both short-term and long-term trends are bullish, like the current price is above the three EMAswhich is a promising sign that we could get the aforementioned breakout if broader macro factors allow.
Bitcoin trading volume at the time of writing is 22,316,000, with a moving average volume estimated at 31,547,000. With hours remaining in this session, it seems likely that bitcoin trading volume will exceed the recorded average, indicating elevated investor interest in the cryptocurrency.
With an RSI reading of 88.91, it is possible that this uptrend is due to a retracement and consolidation before going any further. However, to ensure traders get the most out of this data during an uptrend, it is ideal to use multiple indicators alongside the RSI for more accurate readings. Traders should watch out for volume support and look for any divergence which could potentially signal that the current trend is weakening and this could be a Bitcoin bull trap.
The MACD is also showing bullish signals, further confirming a potential continued bullish move. MACD is at 1069.59, signal line is at 593.41 and histogram is at 476.51. This suggests that the bullish momentum is likely to continue.
The price of bitcoin at the time of going to press is $21,151 with a daily loss of 0.18%. The immediate support levels are at the 200 day EMA at the $21,000 and $20,500 price levels. The immediate resistance levels are at $21,302 – $21,895 and the subsequent resistance levels are at $24,445 – $25,212.
The uptrend may continue, but caution is needed to avoid bitcoin bull traps
It is not yet clear whether the current increase in price and sentiment for bitcoin is the beginning of a bull market comeback or a bitcoin trap.. While there has been a significant increase in prices and trading volumes, liquidity has not fully recovered since the FTX crash and market depth has started to decline again. Furthermore, the recent legal troubles of the cryptocurrency lender Genesis and the Gemini platform could also impact the market. Further observation of the market is needed to determine if this is a lasting trend or a temporary high.
In short, technical indicators suggest that bitcoin is currently in a strong upward trend and that it is likely to continue its bullish momentum in the near term if macroeconomic factors permit. However, the RSI and other fundamental data suggest that a potential reversal could occur in the near future, so investors should pay attention and watch the market closely to avoid a bitcoin bull trap.