Bitcoin News Today: Bitcoin Dips 1.1% as Analysts Warn of Bull Trap Amid Conflicting On-Chain Signals

Bitcoin’s recent price action has sparked debate over whether traders are entering a bull trap at $118,000. Following a brief peak above $123,000 earlier this month, BTC has retreated to the $118,000 level, marking a 1.1% decline in 24 hours and a 3.9% drop from its high [1]. This consolidation phase has prompted analysts to dissect conflicting signals from key on-chain indicators, highlighting divergences in market sentiment and investor behavior.

CryptoQuant contributor BorisVest identified a sharp rise in long positions on Binance within the $116,000–$120,000 range, with the long/short sentiment ratio tilting heavily bullish. This contrasts with prior consolidation periods, such as the $100,000–$110,000 range in 2021, where short positions dominated before a breakout occurred. BorisVest warns that current conditions may create a “trap zone,” where excessive bullish bias could trigger a reversal if liquidity pressure emerges [1]. Historical patterns suggest that extreme sentiment extremes often precede counter-trend moves, raising concerns that traders may be setting the stage for a correction.

Conversely, CryptoQuant analyst Arab Chain noted muted exchange inflows despite Bitcoin’s recent high above $120,000. The Bitcoin Flow Pulse (IFP) indicator, which tracks BTC movements to centralized exchanges, shows no significant increase in outflows, a departure from 2017 and 2021 cycles where sharp inflows typically preceded corrections. Arab Chain argues this reflects reduced selling pressure and holder confidence, suggesting the uptrend could persist. However, he cautions that a sudden spike in the IFP could signal heightened supply pressure and act as an early warning of a potential downturn [1].

The interplay between these metrics underscores market uncertainty. While bullish sentiment remains strong, as evidenced by elevated long positions, the absence of profit-taking activity indicates a patient investor base. This duality complicates predictions, as the market balances between continuation and correction scenarios. Traders are advised to monitor key levels and shifts in the IFP closely, as these may provide clearer directional clues in the coming weeks.

Source: [1] [Are Traders Walking Into a Bitcoin Bull Trap at $118K? Here’s What the Data Shows] [https://www.newsbtc.com/bitcoin-news/are-traders-walking-into-a-bitcoin-bull-trap-at-118k-heres-what-the-data-shows/]