Understanding the Current Bitcoin Bounce: A Trap for Investors

Bitcoin's recent price bounce may appear to signal a return to strength, but the actual market behavior suggests otherwise. The market's thin downside liquidity, along with solid support, indicates that this rally might be designed to lure in enthusiastic investors, only to later disappoint them. Rather than representing a genuine recovery, this movement could be setting the stage for significant losses when market sentiment shifts.

Key Takeaways:

Bitcoin's recent price bounce is deceptive, primarily attracting retail investors instead of indicating recovery.
Current market dynamics suggest potential short-term bullish behavior despite a bearish mid-term outlook.
Long positions may become exit liquidity for newcomers as the market prepares for a significant downturn.
The revised target for Bitcoin is between $64,000 and $70,000, likely by late Q1 or early Q2 of 2026.

Bitcoin

Bitcoin's Short-Term vs. Long-Term Outlook

When evaluating Bitcoin's market situation, Mr. Wall Street recently shared his insights, clarifying his mid- and long-term views on Bitcoin after some earlier confusion. With these perspectives sorted, he moved on to discuss the short-term trends currently influencing market dynamics.

He emphasized that, while he maintains a bearish outlook for Bitcoin in the mid-term, the short-term structure is showing bullish characteristics. The key factor behind this is the lack of downside liquidity, which makes it challenging for market makers to trigger the next major decline. This condition supports the likelihood of a temporary price increase.

Bitcoin BTC’s bounce to inject pain | Source: Chart from Mr. Wall Street on X

Accordingly, Mr. Wall Street has opened long positions around the Value Area Low, specifically between $80,000 and $84,000, anticipating a potential bull trap in the future. Shortly after entering these positions, Bitcoin experienced a dip but managed to retest the $84,000 level, aligning with the weekly MA100, despite multiple misleading upward movements.

His long positions were executed as anticipated, with his entry set at $84,550. He intends to exit his positions only when prices reach the $98,000–$104,000 range, an area characterized by a Fair Value Gap coupled with substantial liquidity, making it a favorable point for taking profits.

Long Positions Don’t Alter Bearish Market Sentiment

Mr. Wall Street clarified that holding long positions should not be interpreted as a bullish stance for Bitcoin. The overarching market outlook remains bearish, with projections suggesting the next significant downward movement could target the $64,000–$70,000 range. In the short term, Bitcoin is supported well, and limited downside liquidity reduces the chances of an immediate decline.

A more probable scenario assumes market makers will engineer a bullish move to draw in retail investors. As latecomers take long positions, they risk becoming exit liquidity, predisposing the market to a sharper decline once enough liquidity accumulates.

Moreover, the $68,000–$74,000 range has become too commonly expected to effectively serve as a "maximum pain" zone that could reset the market structure. Hence, the downside target was adjusted lower to the $64,000–$70,000 bracket, with expectations to reach this zone by late Q1 or early Q2 of 2026. This represents a major initial target rather than the final bottom.

The recent price actions underscore these dynamics. Bitcoin's swift ascent from $87,000 to $90,000, followed by a rapid drop to $85,000 within hours, led to widespread liquidations. Many traders looking to capitalize on the upswing found themselves trapped by the price movements. Deceptive price shifts in both directions are expected to continue as liquidity builds in preparation for a more significant downward movement.

Bitcoin BTC trading at $89,810 on the 1D chart | Source: BTCUSDT on Tradingview.com