Trying to assess current BTC growth: is it a cruel bull trap or an organic bull run?

In this article, we try to understand whether the current market growth is a bull trap. We provide expert opinion and economic data to warn of the dangers of a dramatic market reversal.

What is a bull trap?

Watching the rapid growth of the crypto market in the last week, some experts express skepticism and even fears that we are witnessing a classic bull trap. 

A “bull trap” is a popular pattern of technical analysis that indicates a false growth of an asset, followed by a sudden reversal and fall (sometimes to even lower levels). The bull trap is characterized by irrational growth without any fundamental reason, as well as by the absence of support level retests (i.e., growth in the form of one continuous impulse).

According to many experts, in 2023 they expect an official recession in the U.S. economy and a further decline in the market. Because of this, many traders are cautious about the strange post-New Year’s rally in Bitcoin. 

Is a recession coming?

One of the signs of a bull trap is irrational, explosive growth. Here is the opinion of experts who have come to a consensus about the recession coming in 2023 (a chronic slowdown of the economy).

• All major U.S. banks are now stress testing and preparing for the onset of the recession. According to the WSJ:

The big banks are predicting that an economic downturn is fast approaching. More than two-thirds of the economists at 23 large financial institutions that do business directly with the Federal Reserve are betting the U.S. will have a recession in 2023.

• The World Bank is officially predicting the highest risk of recession in 2023.
• The International Monetary Fund (IMF) expects to enter a recession in 2023. The report added that businesses face a “triple challenge” at the start of 2023. High prices of key inputs, tightening monetary policy, and weakening demand will put a damper on any economic recovery.

Global growth prospects remain anaemic and global recession risk is high.

• Chief economists at the World Economic Forum (WEF) are predicting a gloomy macroeconomic outlook and a global recession for 2023.
• The experts point out that we should not expect a relatively smooth fall of the markets in 2022 when people actively spent their savings. In 2023, the fall will accelerate due to the exhaustion of the strength of household reserves:

The U.S. savings rate has fallen to its lowest-ever level of around 2.3%. This metric is used to measure the amount of money a person deducts from their disposable income to set aside for investing.

 

What do experts think?

The crypto market is traditionally a high-risk market, from which money runs away first in case of any problems. A number of experts are quite pessimistic about the long-term growth of crypto amid continuing macroeconomic decline and the rising cost of money (due to the key rate hike). At least they call for caution when speculating on the current Bitcoin growth. 

Below, we have selected some individual experts’ opinions on the current growth in the crypto market. We also sent a request for comments to the analyst agency Santiment (this text will be updated when we receive a response).

• According to Forbes, Mark Mobius, a billionaire and founder of Mobius Capital Partners, predicted a huge drop in 2022 and now believes Bitcoin could fall as low as $10,000.
• Matthew Sigel, investor and head of digital asset research at VanEck, predicts a drop to the $12,000 level because of higher energy prices.
• And according to a forecast by global bank Standard Chartered, Bitcoin could fall to the $5,000 level in 2023.

Despite skepticism from colleagues, some optimists think we are seeing the start of a real bull run, calling for an open position on further gains. They might be right or not; nevertheless, we think it’s best not to give in to emotions and FOMO and to keep cautious and sober in our estimation of the real state of the market.