Bull Trap? Bitcoin Price Slides Below $7K Despite Strong Indicators

Bitcoin dropped below $7,000 a few minutes before press time, in a move that warrants caution as a possible bull trap.

The negative price action reminds us of a failed long-term bullish breakout seen in July, although the long-term bull reversal is likely to be intact, according to technical studies.

As seen in the above chart, bitcoin's move above the falling channel hurdle on July 24 trapped the bulls on the wrong side of the market.

The bull breakout was short-lived, possibly due to overbought conditions indicated by a relative strength index of 77.00.

The BTC market was rocked by the US Securities and Exchange Commission's rejection of the bitcoin exchange-traded funds at the end of July and that played a big role in pushing prices below $6,000.

Last but not the least, BTC's recovery from $5,859 has produced the first higher price low of the year, which indicates the tide is turning in favor of the bulls.

As a result, it seems that despite today's dip, BTC's bullish move above the falling channel hurdle looks legitimate and the rally is sustainable.

The bull case would weaken if the cryptocurrency finds acceptance below the rising channel.

A UTC close below the 10-day MA would abort the short-term bullish view.

Acceptance below the 100-day MA located at $6,895 would invalidate the long-run bull breakout.