Bitcoin mirrors 2022: a signal for a reversal or a grand bull trap?
The market of the first cryptocurrency is showing a frightening similarity to the 2022 chart. The current recovery from the June bottom, in my observation, could turn out to be the biggest bull trap of the current cycle. The apparent rescue will be followed by a sharp reversal downward and a final capitulation.
Analyzing the price dynamics, I see an almost frame-by-frame repetition of the two-year-old scenario: a June local low, a subsequent bounce that retail investors mistakenly take for the start of a new bullish trend, and, as a result, a massive opening of long positions. Bitcoin is now retesting the 200-day moving average again, and euphoria is building. However, in my assessment, this rally will be followed by a rapid collapse.
The fractal similarity deserves special attention: the June bottom, a false recovery, a divergence in the Relative Strength Index (RSI), and a subsequent sharp sell-off before the real reversal. Let me remind you that in 2022, after the June bottom, Bitcoin lost about another 28% of its value in November-December. If this pattern repeats, we can expect a final crash with the liquidation of all long positions, after which a reversal will only begin in the third or fourth quarter.
Specific Trading Plan and Key Levels
My current strategy is based on the following: I am in a long position with a target in the $67,000–$70,000 zone. It is there, according to my calculations, that the market will gather maximum liquidity before the inevitable drop. After reaching this target, I plan to start gradually accumulating short positions. The key level I am watching is $65,000. If it fails to hold above this level, I will close the long early and immediately switch to shorting, without waiting for the $67,000 mark.
Objective On-Chain Indicators Confirm the Risks
Network data also points to a high probability of a bearish scenario. The Spent Output Profit Ratio (SOPR) has fallen to a 20-month low of -0.35. The last time such a level was observed was in December 2022, right after the FTX collapse, when Bitcoin dropped below $16,000. Historically, this indicator has identified market bottoms with high accuracy, as was the case in 2015 and 2019. In both instances, extreme SOPR values were followed by a powerful reversal.
Additionally, Bitcoin's current price is only 16% above its realized price. Historically, when it is this close to this zone, the average return after six months was 41%, and after a year, 81%. This suggests that the growth potential in the long term is enormous, but first, the market needs to go through a cleansing process.
My professional opinion: The 2022 scenario is not just an analogy but a working pattern in an overcrowded market. The current bounce looks like a classic bull trap, and investors not prepared for high volatility should be extremely cautious. The final capitulation could be the last chance to enter the market before the start of a new long-term growth cycle.