Bitcoin (BTC) is likely to fall to $3,000 before the long expected trend reversal. The probability of that happening now is higher than ever considering the price as run into a strong resistance. The price has faced a strong rejection at this resistance and is likely to fall significantly in the next 48 hours. It is also possible that BTC/USD may fall slightly below $3,000 to trap in some bears and trigger the big short squeeze that we have been calling for the past few days. The number of Bitcoin Shorts has already started to decline but chances are that a fall below $3,000 is going to give most retail traders that false sense of hope for the whales to trigger a successful squeeze.
The probability of a fall to $2,000 or lower levels from current levels is very low, yet the reality on ground is that this is the majority sentiment. If the price starts to fall below $3,000 not only are a lot of people going to believe it is headed lower, they are going to bet money on it going lower. This is where it gets out of hand. Taking a short position on Bitcoin (BTC) when the price has declined aggressively weeks after weeks with no signs of a slowdown is no different than buying Bitcoin (BTC) after weeks of parabolic rise. In both the cases, retail traders that become too used to the price trading a certain way in a certain direction soon pay the price for their complacence.
In technical analysis, it is often believed that a recovery is likely to be a false rally if it does not result in an effective comeback in a short timeframe. If Bitcoin (BTC) falls to a certain level but it takes too long to remain close to that level without staging an effective comeback, the probability is that the rally was a false rally with the sole intent to cool things off before another decline. However, if the price stages an effective comeback and climbs back aggressively after decline to a certain level, it is more likely to lead to a sustained rally. Now, most of the time that happens is because of a big short squeeze. This is why it is easier to see the price recover quickly and effectively in the form of long green candles. However, all of this only happens when one side is completely knocked out.
If we look at the daily chart for BTCUSDShorts, we can see that the number of shots has started to decline. However, if the number of shorts were to keep on falling from current levels, that would make it too easy and straightforward. This is not how it happens most of the time. Usually, when a trend reversal is about to take place, retail bears are given false and misleading signals to make them confident one more time just when they are ready to give up. This final entrapment is known as the bear trap in this case. It is an elaborate ploy to trap majority of the retail bears who become too confident when a market selloff continues for a long time.