Bull Trap

A "Bull Trap" in crypto refers to a false signal that indicates a reversing trend to the upside, luring in investors to buy assets under the belief that prices will continue rising. However, the upward movement is short-lived, followed by a sudden decline, trapping the bullish investors who entered the market prematurely.

Examples:

1. Bitcoin Bull Trap (2017): During the bull run of late 2017, Bitcoin's price surged to nearly $20,000. Many investors entered the market expecting further gains, but in January 2018, Bitcoin's price sharply reversed, falling below $6,000. This decline trapped many investors who had bought into the rally.
2. Altcoin Bull Traps: Altcoins, or alternative cryptocurrencies, often experience bull traps within broader market trends. For instance, a sudden spike in the price of an altcoin might attract investors, but shortly after, the price may plummet, trapping those who bought at the peak.
3. Pump and Dump Schemes: In some cases, bull traps are deliberately orchestrated as part of "pump and dump" schemes. Fraudulent actors artificially inflate the price of a cryptocurrency through false hype or manipulation, enticing investors to buy, only to sell off their own holdings at the peak, causing the price to collapse and leaving other investors with losses.

In essence, a bull trap deceives investors into believing that a declining asset is on an upward trend, leading them to make buying decisions that result in losses when the price reverses.