Bitcoin has recently seen a surge in volatility, setting a new all-time high before a swift price reversal, creating what technical analysts are calling a classic bull trap. This price action has increased the likelihood of a sideways consolidation phase, with critical levels now being watched closely by traders.
Technical Analysis
The Daily Chart
On the daily timeframe, a recent rally saw Bitcoin buyers successfully push the asset to a new peak of $124.4K. This victory was short-lived, however, as significant selling pressure quickly erased the gains. This rapid reversal trapped buyers who entered the market late, a move characteristic of a bull trap.
Following the sharp decline, Bitcoin’s price has returned to a crucial support zone around $118K. This level is significant as it aligns with the lower boundary of an ascending channel. The market’s reaction at this confluence will be pivotal in determining the next direction. A decisive break below this support could signal a deeper correction, while a bounce could reignite bullish momentum and indicate that the long-term uptrend remains intact.
The 4-Hour Chart
A closer look at the 4-hour chart reveals the mechanics of the recent price action. The move above the previous high appears to be a classic liquidity hunt, designed to trigger breakout buy orders and stop-losses before the sharp reversal.
The subsequent decline broke below the most recent swing low, providing an early indication of a potential shift in market structure. Currently, Bitcoin seems to be consolidating within a range defined by $116K and $124K. Until the price makes a convincing breakout from this range, short-term movements are expected to remain choppy as the market moves between the liquidity pools at both ends of the range.
On-chain Analysis
On-chain data provides further insight into the recent market dynamics. A sharp spike has been observed in Binance’s Mean Inflow (7-day SMA), which has reached one of its highest levels in recent months. This metric measures the average amount of Bitcoin being deposited to the exchange. Historically, such significant increases in inflows are often associated with preparations for selling, collateralizing margin positions, or institutional portfolio rebalancing.
Sustained high inflows suggest that more Bitcoin is moving from external wallets to Binance’s trading wallets. When these inflows are not met with equally strong buying demand, they can precede periods of short-term selling pressure.
This observation is further supported by a rise in positive netflow, confirming that Binance’s total Bitcoin balance is increasing as inflows exceed outflows. Without a corresponding increase in spot demand, this imbalance can lead to downside volatility, especially if large holders are preparing to sell or hedge their positions using derivatives.
