Bitcoin Price Drop Likely a ‘Bear Trap,’ According to Crypto Expert

Bitcoin’s price continued to decline on Thursday, pressured by selling activities from Bitcoin miners, the ongoing refunds from the defunct Mt. Gox exchange, and actions by the German state of Saxony. However, a crypto expert has suggested that this persistent downtrend might be “a bear trap.”

### Reasons for Bitcoin’s Downtrend

The Mt. Gox exchange remains a significant factor affecting Bitcoin’s price, as its trustees have recently begun refunding clients who were impacted by a hack in 2014. The total amount distributed is uncertain, but it’s known that wallets associated with the exchange moved around $9 billion worth of tokens earlier this year.

In addition, the German government has been selling Bitcoin that was confiscated from a piracy website, which could represent at least $2 billion in assets.

The recent sharp decline in Bitcoin has led to fears that major miners may resort to selling off portions of their holdings to recoup losses, especially following the decrease in miner rewards as a result of Bitcoin’s halving earlier this year. These developments have significantly impacted Bitcoin, which has seen about a 15% reduction in value over the past month.

### Insights from a Crypto Expert

Bitcoin is currently trading above $58,000 after rebounding from last week’s low of $53,600. The cryptocurrency has experienced a technical downtrend since reaching a record high of $73,800 in March, marked by consecutive lower highs at $71,300 and $63,900.

Eugene Cheung, head of institutions at Bybit, indicated that while there remains optimism for the medium-term outlook, the cryptocurrency market remains vulnerable to sudden macroeconomic events that could drastically sway global market sentiments. He pointed out that the $57,000 support level has so far sustained Bitcoin’s price, reflecting market resilience and limiting further declines.

“If the price can recover above the 200-day moving average quickly, this recent dip could be seen as a bear trap, opening the door for a potential rally,” Cheung stated.

Historically, market corrections have served as healthy resets within ongoing bull markets, aligning with well-established trends. Cheung noted a decrease in trading activity and crypto prices on centralized exchanges for nearly two months following the halving event in previous Bitcoin cycles, a trend that is currently repeating.

“The market cycles typically last 12 to 18 months after Bitcoin halving before reaching a new cycle peak,” he remarked. “Despite widespread concerns that ‘this time is different,’ the cyclical nature of markets often shows that while history may not repeat itself, it certainly rhymes.”

Meanwhile, data from the analytics firm CryptoQuant presents a contrasting view, suggesting that a significant price correction for Bitcoin or the start of a prolonged bear market could be on the horizon. This concern arises as the profit and loss index hovers near its 365-day moving average, with previous crossovers to the downside accompanying notable price drops in May and November 2021.

Additionally, CryptoQuant’s indicator for Bitcoin’s bull-bear market cycle is approaching a crucial level that may signal a potential entry into a bear market.