Today, the cryptocurrency market experienced a sharp decline, with Bitcoin briefly dipping below $92,000. This represents a 16.73% drop from its peak, as seen in the chart below. Of course, other cryptocurrencies also saw significant drops, leading to widespread panic and concerns among investors that this could signal the end of Bitcoin's bullish trend.

However, some analysts believe this price dip may actually be a "bear trap," a temporary pullback before prices rebound. If this is the case, it could be the perfect time to enter the market. But what if the analyst is wrong, and prices continue to fall? You could end up stuck with assets purchased at a relatively high price.

Feeling torn? Don’t worry. If you can manage your emotions, whether this is a real bear market (a true decline) or just a trap (a short-term bear market rally), you’ll find a strategy that works for you. For new investors in the space, there's no need to panic. Our "Airdrop Reference" Zero-Basics Guide will walk you through step-by-step on how to navigate this.

1. What is a Bear Trap?

A bear trap is a market strategy that typically occurs during a prolonged uptrend. When large players or market movers intentionally sell off to push the price down, it creates the illusion of a short-term "bear market," tricking retail investors into selling their positions. As these investors panic and sell, the large players buy more assets at lower prices, and the price may quickly rebound. Retail investors, having sold in fear, often miss out on the opportunity to profit when the market recovers.

1.1 The Market Makers Need a Push

However, retail investors are not foolish, and market movers are not infallible. If there’s no momentum to capitalize on, the market movers can’t make a significant impact. In this case, the Bitcoin drop has been triggered by external factors, such as Trump’s tariff increase on Canada, Mexico, and China.

Trump's tariff policies have not only brought uncertainty to the global economy but also sparked a chain reaction in the cryptocurrency market. The tariff hike may lead to rising prices, decreased consumer confidence, and slower economic growth. These factors intensify risk-averse sentiment, causing investors to move funds into safer assets such as gold and the US dollar, while pulling away from riskier assets like cryptocurrencies.

1.2 The Market Makers Need CEX

But just having this external momentum isn’t enough. There also needs to be something that fuels the fire, which, in this case, is the Centralized Exchange (CEX). It’s crucial to understand that, due to their large transaction volumes, centralized exchanges significantly influence cryptocurrency prices. Bitcoin’s price is not set by decentralized exchanges like Uniswap, but by centralized exchanges such as Binance.

However, CEX platforms are opaque and lack regulation, with wash trading being widespread. They can easily amplify price movements—prices can drop lower or rise higher than they would in a decentralized market. Indeed, not only bear traps exist but also bull traps, where the market movers push the price up before causing it to crash. I previously wrote an article titled “Don’t Trust Bitcoin’s Price”, where I used insider data and research papers to explain how CEX platforms manipulate Bitcoin prices. Although there’s been some tightening on CEXs, the situation is still far from ideal. I recommend reading that article and focusing more on decentralized exchanges in the future to take control of crypto pricing away from CEXs.

1.3 Market Manipulation Techniques

In addition to leveraging external forces and the power of CEXs, market makers are also adept at manipulating market sentiment. In the cryptocurrency market, especially with leading coins like Bitcoin, sentiment swings are crucial in determining price direction. Market movers use media, social platforms, and even statements from industry leaders to create fear or greed in the market. For instance, when market sentiment is overly optimistic, they might quietly sell off, triggering a small correction that draws more retail investors to panic sell, enabling them to buy back more at lower prices. Conversely, when sentiment is gloomy, they might spread rumors or good news to quell bearish sentiment and spark a rally, profiting from the rebound.

That said, it’s not easy to determine whether this is a true bear market or a bear trap. My personal analysis leans toward this being a bear trap.

2. Why I Believe This is a Bear Trap

My analysis comes down to two main points: the "false recession" and the "real narrative."

2.1 False Recession

A "false recession" refers to a situation where the market shows signs of decline, panic, and "recession" signals, but these are not the result of fundamental changes in the market’s structure. Instead, they are typically triggered by external factors or short-term emotional swings, not by a deterioration of macroeconomic fundamentals or industry trends.

The recent Bitcoin dip, while closely linked to Trump’s tariffs and other external pressures, does not signal a fundamental shift in the cryptocurrency market. Bitcoin’s decentralized nature and its role as a store of value have not been shaken. Additionally, the increasing attention from central banks and continued investment in blockchain technology from global powers like China, Europe, and the US indicate that the global recognition of cryptocurrencies remains strong. Even if risk-averse sentiment causes short-term capital outflows, many investors still believe in the long-term potential of Bitcoin. Therefore, the current downturn is likely just an overreaction to short-term emotions and doesn’t overshadow the overall healthy development of Bitcoin’s market.

2.2 Real Narrative

Looking at the true market narrative, we see Bitcoin and other cryptocurrencies increasingly playing a significant role as emerging financial assets globally. Major traditional financial institutions like PayPal and Square have entered the space, with more institutional investors incorporating cryptocurrencies into their portfolios. Additionally, the application of blockchain technology in industries like DeFi and NFTs is expanding, creating new growth opportunities in the crypto market.

More importantly, the regulatory environment for cryptocurrencies across major economies is steadily improving. The gradual stabilization and transparency of these policies help alleviate long-term holders' concerns, boosting market confidence. While short-term volatility may still occur, it does not signal the end of Bitcoin’s uptrend.

2.3 Analysis and Action

Looking at the overall market sentiment, we haven’t seen widespread panic selling. While Bitcoin’s drop has been substantial, the market hasn’t been gripped by mass fear, and large-scale capital withdrawal hasn’t occurred. In fact, some long-term holders are buying at these lower levels, suggesting that the market isn’t facing a fundamental issue.

Based on the current market structure, the bearish sentiment may be amplified in the short term, but it won’t deliver a fatal blow to the long-term trend. This temporary correction presents an opportunity for those looking to enter the market, especially with major assets like Bitcoin, where investors still have confidence in the long-term potential.

So, even though short-term declines may have triggered some panic, the true market narrative indicates that this correction is likely just part of the bear trap. A rebound may follow, offering higher returns for investors who stay calm and strategic.

Moreover, on January 13, 2025, I specifically discussed Goldman Sachs’ correction probability, warning of a sharp pullback around this time.

In conclusion, I view the current market dip as more of a bear trap than the end of Bitcoin’s bull run. That's why I’ve purchased $4,000 worth of Bitcoin in two separate transactions on Drift.

Drift is a decentralized exchange on Solana, and I believe it is currently the best decentralized platform. Although it doesn’t support all coins, its margin leverage is superior to that of centralized exchanges. Just to give you a sense of its advantages: On centralized exchanges, you need a deposit to earn interest, but with Drift, interest starts accruing the moment your funds are in the account. Here’s a beginner’s guide to Drift.

Getting Back to the Point: Why I Bought $4000 Worth of Bitcoin Instead of More

The reason I only bought $4000 worth of Bitcoin instead of more is simple: even if I’m wrong, it won’t matter. If the price continues to drop, I won’t be at risk of liquidation. Of course, my judgment may not be correct, and there’s a 50% chance I’m wrong. If you're a newcomer to the crypto space, you might want to use the following more cautious approach.

3. Whether It’s a “Short-Seller” Strategy or a “Trap” Strategy

In the current market environment, whether it’s the “true drop” of a bear market or the “short-term rebound” of a bear trap, for most investors, the right strategy is not to overly chase opportunities in short-term fluctuations but to remain rational and focus on long-term investments. For newcomers, the most suitable strategy is DCA (Dollar-Cost Averaging).

3.1 What is DCA?

DCA (Dollar-Cost Averaging) is an investment strategy where you invest a fixed amount of money at regular intervals, regardless of market price movements, to smooth out risk and avoid the excessive impact of short-term market fluctuations. In the highly volatile market of cryptocurrency, DCA helps investors avoid making emotional mistakes during extreme market sentiment.

Specifically, the core principle of DCA is to buy a fixed amount of an asset at regular intervals (e.g., weekly, monthly, etc.), regardless of its price fluctuations. This way, even in a downtrend, you can buy at lower prices; when the price rises, your holdings increase in value. Most importantly, by spreading out your purchases, you can average the risks caused by market volatility.

3.2 The Advantages of DCA

We can look at historical data to understand how powerful the DCA strategy really is.

First, reviewing Bitcoin's historical performance, although it has experienced dramatic fluctuations in the short term, Bitcoin has shown a steady upward trend in the long run. For example:

• 2011 to 2013: Bitcoin’s price dropped from $1 to $0.2 in the second half of 2011. However, in the next two years, Bitcoin’s price skyrocketed to over $1000. Had you invested regularly in Bitcoin starting in early 2011, even with short-term losses, the long-term return would have been substantial.

• 2017 Bull Market: In 2017, Bitcoin’s price fluctuated wildly, rising from around $1000 to nearly $20,000. But the DCA strategy allowed investors to avoid the market's extreme ups and downs, ultimately achieving higher investment returns.

• 2020 to 2021: After a sudden and sharp drop in Bitcoin’s price in March 2020, market sentiment was very low in the short term. Many investors believed Bitcoin’s price was at its end. However, the DCA strategy helped investors avoid being swayed by panic, ultimately resulting in Bitcoin’s historic rise in 2021 with substantial returns.

According to relevant studies, investors using DCA have generally achieved better long-term returns than those who invested a lump sum. Over the past 5 years, Bitcoin investors using DCA had an average annual return rate of 60%, while those who simply invested at the bull market peak had an average annual return rate of only 45%.

3.3 How to Implement the DCA Strategy?

Implementing DCA is very simple, but it requires patience and consistency. Here are the key steps to implementing DCA:

• Determine Investment Amount and Frequency: First, choose the investment amount that you can afford. For example, you could invest $500 monthly or $250 biweekly. The amount shouldn’t be too high to ensure you can stick to it.

• Choose Investment Assets: Although Bitcoin remains the most representative cryptocurrency, you can also consider other high-quality blockchain projects like Ethereum (ETH) and Solana (SOL). If you're a beginner, sticking with Bitcoin may be a safer choice to avoid asset diversification issues.

• Choose a Suitable Trading Platform: Many platforms now support automatic DCA. It’s recommended to use Jupiter, a decentralized exchange, which offers DCA functionality.

• Be Consistent and Patient: The key to DCA is long-term commitment. Short-term market fluctuations should not become a source of anxiety for long-term investors but rather an opportunity to buy at lower prices. As long as the market remains generally positive, DCA investors will eventually see good returns.

If you're a beginner, I recommend the ARP2 project launched by Airdrop Reference. Even with Bitcoin’s significant price drop today, you still have a 57.76% return, as shown in the image below.

Why? Because not only can you capture Bitcoin's long-term upward trend, but you also get unlimited opportunities for high buy-low, sell-high rebalancing through extreme rebalancing. This is the ARP2 zero-based tutorial.

Conclusion

We must acknowledge the existence of bear traps, which are a major risk in the cryptocurrency market. Although we often wish to enjoy faster and more convenient trading through centralized exchanges (CEX), it is precisely this convenience that allows exchanges and major capital to manipulate market prices. In centralized exchanges, the lack of transparency often makes price manipulation hard to detect, which increases the risks retail investors face. Each of us, as market participants, should be aware of this.

Decentralized exchanges (DEX), on the other hand, exist to avoid the risk of price manipulation. Through smart contracts and code, decentralized exchanges eliminate any central control, ensuring the fairness and transparency of transactions. It is because DEXs remove the interference of intermediaries that investors’ interests are better protected. Supporting decentralized exchanges is not only a necessary measure to resist manipulation but also a way to return market pricing power to every investor, promoting fair competition in the market. Platforms like Drift exist specifically to address this issue.

As for investment strategies, have you realized that the highly praised DCA (Dollar-Cost Averaging) is not entirely a rational strategy? Constantly buying Bitcoin over the long term is not backed by rational market analysis but stems from the belief in Bitcoin's long-term value. This belief proves that sometimes irrationality can lead to great things. If, in 2013, Zhao Changpeng hadn’t sold his house in Shanghai to buy Bitcoin, we might not have Binance today. If Christopher Columbus hadn’t irrationally miscalculated the Earth’s circumference in 1492, perhaps the New World would not have been discovered.

I’m not trying to deny rationality, but I want to remind you that rationality is always relative and limited. Sometimes, it is this kind of irrational impulse that drives historical progress and results in world-changing accomplishments. We don’t always need to pursue so-called “rationality”; sometimes, it’s that firm belief in the future that helps us find our direction in a market full of volatility and uncertainty.

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Zero-Cost Airdrop Recommendations:

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Beginner's Guide Recommendations:

• Buy 0.001 BTC: https://t.co/UeaC0pQm5m

• Store Bitcoin in a Cold Wallet: https://t.co/sbT1E9AB14

• Sell 300 USDT: https://t.co/ICb4wHMWq1

• Perpetual Contracts: https://t.co/67J5atbVeo

Airdrop-Friendly DeFi Services:

• ARP1: Liquidity Mining + Re-staking: https://t.co/XJs0w3edXN

• ARP2: Extreme Rebalancing: https://t.co/9E8Q9XWLQh

About Airdrop Reference

Airdrop Reference is an innovative blockchain education and promotion platform aimed at spreading basic blockchain knowledge and helping ordinary users understand and participate in the development of blockchain technology. The mission of this project is to lower the entry barriers to blockchain, promote high-quality blockchain projects, and allow more people to enjoy the benefits of the Web3.0 era.

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