Is the weakness of Bitcoin after the ‘Elon Musk pump’ hinting at a bull trap?

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Bitcoin (BTC) price shows a general weakness as it is difficult to establish USD 34,000 as a support level. Overall, BTC appears to be stagnating with no signs of a short-term relief rally, prompting traders to be cautious.

One worrying trend is that Bitcoin volume is stagnating along with price, apart from the “Elon Pump” on January 29th. This trend suggests that buyer demand has declined overall from a high of $ 42,000, although BTC hovers low in the US state’s $ 30,000 region.

BTC / USDT 4-hour price chart (Binance). Source: TradingView.com

Bitcoin gets chopped off after revisiting $ 38,000

On Jan. 29, the price of Bitcoin on Binance rose to $ 38,461 after Tesla CEO and the world’s richest man, Elon Musk, allegedly showed support for Bitcoin.

However, ahead of this rally, analysts in the chain warned that Bitcoin’s momentum was slowing.

For example, Ki Young Ju, the CEO of CryptoQuant, described the high selling pressure from Bitcoin miners as a sign of a near-term bearish scenario.

Although the price of Bitcoin briefly rose 14%, it fell back below $ 34,000 within 24 hours. Hence, any weakening of the on-chain indicators was likely a warning that BTC would be backtracking most of its “Elon-Pump” gains.

Before the rally, Ki wrote:

“The Exchange Whale Ratio has hit its eight month high, which means that $ BTC may have a big red candle if the price falls. It’s said to be below 85% if this bull run is legitimate. Otherwise, it’s likely a bull trap. “

Whales were likely sold when the price of Bitcoin abruptly rose to the resistance level of $ 38,000, causing a sharp correction.

Given the shaky indicators in the chain and miners’ selling pressure, traders are also cautious when it comes to craving for BTC / USD in the short term.

A pseudonymous trader named “Salsa Tekila” said it will not use leverage until Bitcoin breaks out or falls back to $ 30,000. He said:

“We’re at the point where $ BTC is far enough away from the 30,000 that I can’t crave some form of leverage, but at the same time, I wouldn’t be neglected. So it’s best to be long before a big down / legacy open / probably Monday morning. NO LEVER “

Meanwhile, another popular pseudonymous trader known as the “Byzantine General” argues that the rally has broken. Therefore, even if Bitcoin is bullish in the macro picture, a greater disadvantage is possible until a convincing breakout occurs in lower time frames. He noticed:

“The bull run is still on IMO, but the rally is broken. If we reclaim annual TWAP we can continue pumping, but until then it kind of looks like a lot. “Bitcoin price chart with TWAP level. Source: TradingView.com, Byzantine General

What to look out for

Traders and technical analysts are closely watching Bitcoin’s response to the $ 34,500- $ 35,000 range.

When Bitcoin breaks out with strength, momentum and high volume, the likelihood of a short-term trend reversal increases.

However, if Bitcoin struggles to retest the $ 34,500 resistance level and continues to stagnate in the $ 33,000 region, the risk of another collapse of the $ 33,000 support remains.

Crypto Fear and Green Index (78 or “extreme greed”). Source: Digital Assets Data

Other signs that BTC prices may fall again are the Crypto Fear and Greed Index, which remains at “extreme greed” levels, and the Google search for “Bitcoin” which has since hit multi-year highs earlier this month has decreased by 50%.