Bitcoin’s Holiday Rally: Are BTC Bulls Creating a Classic Bear Trap?

As we approach the end of 2025, the fourth quarter has emerged as the weakest period of the year. The recent pullback has erased nearly 63% of the gains made during the Q2 to Q3 rally, putting many HODLers in a difficult position. However, with just a week left in the year, we are entering a time of thinner market liquidity typically seen during the holiday season, which is crucial for timing market movements.

Key Takeaways

Q4 Weakness: The fourth quarter of 2025 has proven to be challenging for Bitcoin investors, wiping out significant gains.
Market Dominance: Despite recent downturns, Bitcoin's market dominance remains stable at 60%.
Altcoin Struggles: Altcoin dominance has reached a five-year low, reflecting a concentrated risk appetite in Bitcoin.
Short Positions: A large cluster of leveraged shorts exists around the $95,000 level, which could become a target for bulls.
Potential Bear Trap: Favorable technical indicators create a possibility for a bear trap, setting the stage for a potential Bitcoin rally as we enter the holiday season.

Bitcoin’s holiday rally: Are BTC bulls setting up a classic bear trap?

Currently, Bitcoin (BTC) remains 25% below its peak of $126,000. Despite ongoing fears and uncertainties (often referred to as FUD), Bitcoin's market dominance has remained steady at around 60%. This stability suggests that investors may be keeping their capital in Bitcoin instead of moving it to other assets.

BTC.D Source: TradingView (BTC.D/USDT)

This level of dominance indicates a certain level of confidence in Bitcoin. Usually, one might expect a shift towards altcoins during such times; however, altcoin dominance, excluding the top 10, has dropped to just 6.73%, marking a five-year low and highlighting that risk appetite remains focused on Bitcoin.

This leads us to an important consideration: What might happen if macroeconomic fears subside and the market shifts back towards a risk-embracing attitude? With the holiday season approaching, could Bitcoin bulls step in, squeeze late short positions, and set up a traditional bear trap?

Is a Short Squeeze Prepping for Bitcoin’s Holiday Bounce?

The holiday season seems to be arriving at an opportune moment. It's been over a month since Bitcoin regained the $90,000 mark, and as a result, a significant cluster of short positions has formed just above this level due to traders betting on volatility.

Looking closer, there are over $5.8 billion in leveraged short positions around the $95,000 mark, making this level an appealing target for bullish traders. The question remains: Will the bulls make their move? Notably, Bitcoin's MVRV indicator is signaling “undervaluation,” providing further motivation for a potential upward shift.

Bitcoin Source: Coinglass

In summary, the conditions appear ripe for a traditional bear trap setup. Bitcoin's technical indicators also support this notion, with the RSI hovering around 35, while BTC has remained below the $90,000 level for six consecutive weeks. This potential resistance-to-support transition could create a solid foundation for a breakout above this key zone, targeting the stacked short-liquidation points, thereby adding upward pressure and perhaps spurring Bitcoin’s much-anticipated “holiday rally,” with $95,000 as the immediate resistance goal.

Final Thoughts

In conclusion, as we approach the turning point of a new year, the behaviors within the Bitcoin market could very well define short-term trends and investor sentiment. Whether the bulls capitalize on the current conditions remains to be seen, but the signs suggest a compelling scenario for potential gains.