Table Of Contents
The cryptocurrency ecosystem is a complex system, and all users need to be extra vigilant and careful. Scams and traps with different dimensions rule the entire sphere. Investors and crypto enthusiasts will have to pay extra care when they are involved in any kind of cryptocurrency transaction.
Scams and traps related to cryptocurrency are nothing new. The crypto Bear trap is a kind of trap that can be seen in the cryptocurrency ecosystem. It is a kind of market manipulation that can lead to the loss of cryptocurrency possession, and the investors may have to face a loss.
In this article, we comprehensively analyze the concept of the Crypto Bear trap and how to avoid it in the cryptocurrency arena. You can implement a variety of safety measures to stay away from the crypto Bear trap, and we will be discussing that too.
What is the crypto Bear Trap?
The crypto market and cryptocurrency are highly volatile, anything can happen in there in a fraction of a second. The crypto bear trap is also a momentary market trend that can happen to the cryptocurrency market. The concept of the Crypto Bear trap can be defined like this, it is a situation that comes from a false alert of a bearish trend. In this situation, the cryptocurrency market of a specific coin will drop temporarily and the traders or investors believe that a bearish trend is on the way and they will be forced to sell or shorten their assets, but after some time, the price of the same cryptocurrency will quickly rebound and it will lead to a huge loss for those who sold their assets for a low price.
This trap is not a natural trend in the cryptocurrency market. This is a manipulated trend that is created to trap low-level investors and traders. This trend is a manipulated false alert created by the large players or big fishes in the cryptocurrency ecosystem. They are creating this manipulated trend by selling a large amount of a particular asset and this will lead to the bearish trend of that particular asset in the market. Due to this downward price movement, smaller traders and investors will panic and sell their assets for a loss. Once the assets from smaller traders are poured into the market, these large players can purchase those assets for a lower price. The bearish trend will gradually fade away once the asset is accumulated by those large-scale players.
How to identify and confirm the Crypto Bear trap
Identifying the bear trap is not an easy task, we may not have enough resources to confirm that the bearish trend in the market is due to this false alert. There are some indicators available to confirm whether it is a Bear Trap or not.
- A sudden and unanticipated shift in the market sentiment could be an indication of potential market manipulation and bear trap.
- Investors and traders need to be cautious when the market seems to be moving in a particular direction for a long period. This could be a sign of possible market manipulation.
- Technical indicators can be used to detect crypto bear traps. Indicators like Relative Strength Indicators (RSI), stochastic oscillators, and moving averages are commonly used to identify the potential crypto bear trap.
- Potential bear traps can be identified by analyzing volume and price movement. A major increase in volume along with price movement may not be a trap. A downward turn with low volume could be a crypto bear trap.
Traders and investors often fall for this market manipulation easily. The common mistakes are the main reason for this, they need to be vigilant and pay extra attention to the market trends. A proper investment strategy and clear-cut awareness should be the basic possession of a cryptocurrency investor or trader. Investors should always approach the downward trajectory wisely. Making wise decisions according to the market trend is always a better solution against crypto bear traps or any other cryptocurrency-related scams.
How to avoid the crypto bear trap?
Crypto bear trap can be a common thing in the crypto market, we may not be able to completely obliterate the scam from the ecosystem. All we can do against this trap is avoid it. We can effectively avoid with existing safety measures. To avoid this trap, investors should be comprehensively aware of the trap and its nature. If they have enough knowledge about the scam, then they will be able to make advanced strategies to prevent the scam and possibly avoid it effectively.
Stick to your current plan
Sticking to your current plan or trading strategy is the first step to avoiding all the potential cryptocurrency scams including bear traps. Always maintain your trading strategy at any stage of investment. Market sentiment may or may not change, but your strategic planning according to it will be the most important one. So stick to your trading plan and don’t fall for any market manipulations.
Analyze the market technically
To avoid the crypto bear trap, users may need to analyze the market trend beyond the price fluctuation. Conducting a technical analysis of market trends is the best way to prevent the crypto bear trap. Analyze and confirm the price movements of cryptocurrency with volume changes. Valuating the price variation along with the volume will give you an idea of whether the market trend is a manipulated one or not.
Research
Conducting thorough research is the best way to prevent scams or traps related to the cryptocurrency market. Research the market with existing data and evidence available in the community. Researching the market will equip you with confidence and possible market fluctuations, so this will enable you to make wise decisions when a crisis emerges.
Keep an eye on large players
Large players in the cryptocurrency arena will most probably be responsible for the bear traps. So watching and following these large players will be beneficial along the journey. Following these institutional investors and hedge funds will give you an upper hand when you analyze the sudden changes in the market sentiment.
Discipline
Discipline is the basic requirement in the cryptocurrency ecosystem. Taking impulsive decisions according to the market sentiment rather than staying disciplined is a big problem in the crypto market. These kind of people have a higher chance of exposing to the scams and traps. Avoid all these impulsive decisions based on fear and greed, this can only cause a negative impact instead of a positive one.
These are the general instructions that need to be followed to stay away from all the possible cryptocurrency scams and traps. Sticking to these above-mentioned instructions strictly will remove you from the victim list of the crypto bear trap.
Also Read: Beginner’s Guide To Cryptocurrency Trading Strategies
The Relationship between Psychology and Bear Trap
The bear trap is a scam that has a close association with the psychological aspects of human beings. Traders and investors may have that psychologically impulsive instinct while making trading decisions. The conformist attitude of human beings or the tendency to make decisions according to fellow investors’ approach will create an impact on the decision-making ability of each individual.
Investors need to avoid their herd instincts and act wisely to stay away from all the possible scams and traps. The negative impacts on the market will transform our decision-making skills and it will be an emotionally driven one, so avoiding all those emotionally driven decisions is the best thing we can do to prevent scams from our cryptocurrency trading or investment process. This is why scammers or large-scale players use these psychological dimensions to create a false panic in the market.
The Bottom Line
Staying away from all the possible cryptocurrency scams and traps is a necessity. To stay away from these, you need to equip yourselves with the basic requirements and strategies. To avoid the crypto bear trap, you should not allow short-term price fluctuations to make your investment decisions. You have to be capable enough to determine whether the market trend is manipulated or not, otherwise, you have a higher chance of falling into the traps of scammers.
This article is designed to make people aware of the crypto bear trap and its potential consequences. The information provided in this article is not designed as investment advice or financial advice. Use and treat this information to create awareness not as advice disseminated for future investment strategy.
