World Blog by humble servant. A bear trap in crypto is the exact mirror image of the bull trap we discussed in stocks — but in crypto it’s usually faster, more violent, and 10× more vicious because of 24/7 trading, extreme leverage, and liquidation cascades.
A bear trap in crypto is the exact mirror image of the bull trap we discussed in stocks — but in crypto it’s usually faster, more violent, and 10× more vicious because of 24/7 trading, extreme leverage, and liquidation cascades.
What a Bear Trap Looks Like in Crypto
- Setup (the fake breakdown)
- Bitcoin or the altcoin market has been ripping higher for weeks/months.
- Greed is extreme (funding rates heavily positive, everyone leveraged long, social media screaming “up only”)
- Price suddenly breaks a major support level (e.g., BTC breaks $60k, $100k round number, 200-day MA, etc.)
- Stop-losses and liquidation clusters get hunted → price dumps 15-40% in hours or days
- Everyone panics: “Bear market confirmed!”, shorts pile in with 20-50x leverage, perpetual funding flips negative
- The Trap Springs (the squeeze)
- The breakdown was fake — it was a deviation below support designed to trigger stops and scare people into shorting
- Whales/BTC ETF flows/smart money start buying the dip aggressively
- Price violently reverses and rips straight back above the “broken” support in hours or a single daily candle
- All the leveraged shorts get liquidated in a cascading squeeze ensues
- Price often goes on to make new all-time highs or at least a massive counter-trend rally
- Result
- Bears who shorted the “breakdown” get absolutely wrecked
- Late longs who sold in panic miss the entire move higher
- Bulls who held or bought the dip make life-changing gains in days
Classic Crypto Bear Trap Examples
| Date | Asset | What Happened | Result |
|---|---|---|---|
| April–July 2021 | BTC | Broke below $30k (major psychological level), dumped to $29k → looked like 2018 repeat | Ripped to $69k new ATH in 4 months |
| May 2022 | BTC/ETH | LUNA/UST collapse → BTC broke $30k, then $20k → everyone called for $10-14k | Wicked back above $30k in days, then +80% rally to $31k in weeks |
| June 2023 | BTC | Broke below $25k after SEC sued Binance/Coinbase → looked like bear resumption | Immediate V-reversal to $31k, then marched to $73k |
| August 5, 2024 | BTC | Japan carry-trade unwind → BTC dumped from $70k → $49.5k in hours, total crypto liqs >$1.2 bn | 24-hour candle closed green, back above $60k in 48 hrs, new ATH 7 months later |
| March 2025 (hypothetical so far) | BTC | Many people worried the post-ATH correction breaking $80k–$85k would be a bear trap again | TBD — but pattern rhymes |
Why Bear Traps Are So Common (and Brutal) in Crypto
- Perpetual futures + high leverage → liquidation engines create waterfalls down and rockets up
- Spot CVD (cumulative volume delta) often shows aggressive spot buying during the wick down (smart money accumulating)
- Stop-loss clusters are visible on the market is reflexive and loves hunting them
- 24/7 market no weekend gaps to let fear cool off
- Narrative drives everything when price breaks a level everyone instantly believes the opposite narrative, then gets punished
How to Spot a Potential Bear Trap in Real Time
Bullish signs during the breakdown:
- Massive spot buying on exchanges (look at spot CVD on Coinalyze or Hyblock)
- Long liquidations >> short liquidations during the dump (means it’s stop hunting, not real selling)
- Price wicks far below support but closes the candle back inside or above
- Funding rate goes extremely negative (shorts paying longs = crowded short)
- Open interest drops sharply during the dump (forced deleveraging, not new shorts)
The Cruelest Version: The “Double Trap”
Crypto loves doing this:
- Bull trap everyone at the local top (fake breakout → dump)
- Then immediately bear trap the people on the breakdown (fake break → moon)
Result: Both bulls and bears get slaughtered in the same week, only the people who did nothing (or bought the wick) win.
Bottom line: In crypto, whenever literally everyone is convinced “this time the bear market is back,” it’s usually the exact moment the most shorts are about to get incinerated in a historic squeeze. The market’s favorite game is making the maximum number of people wrong in the shortest possible time — and bear traps are its masterpiece.
Comments
Post a Comment