Bitcoin Witnesses a Bull Trap as the $40k Rally Gets Busted

Jatin Sewani
2 Min Read

Bitcoin falls back to a low of $36514 after a brief touch to $40000 as a reactionary rally depicting the markets started pulling down post-Fed-open on May 5. 

The downward move came out as a courtesy of the correlation of crypto markets with U.S. stock markets, which opened up with a downfall of around 3.2% for the S&P 500 and 4.5% for the Nasdaq 100 at the time of writing. 

Btc, bitcoin, crypto
Btc price action | source: trading view

The class of traders and short-term investors seemed to be caught in a bull trap as the effect of the Fed’s interest rate hike was set in today. Despite the recent news of Terra’s $1.5 Billion worth of bitcoin buy, the market failed to rise up, thereby continuing to behave as a falling knife. 

On the contrary, taking the dollar index in the picture, all time 20 year highs at approximately 104 as of the time of writing. This action resulted in a boon in favor of DXY, reversing the earlier losses. 

With the dollar index rising and risk assets like Bitcoin falling over Fed’s interest rate hike might be a sign to ‘not downplay’ the possibility of a global deleveraging event which might be as contagious to crypto markets provided its increased correlation with the US Equities Market. 

Remember, an excellent long-term survival strategy to follow should always be about following what the smart money is doing, and crypto allows this privilege to a pretty certain extent for getting dirt on the respective.

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