Bitcoin rally to $66,921 was a bull trap as bearish signals mount

Bitcoin fell 2.7% to $63,400 after a failed breakout above $66,921 reversed and erased the prior week's gains, Decrypt data shows.

"Every major indicator on the daily chart is bearish," Decrypt's technical analysis showed, citing the death cross formation and the Relative Strength Index at 46.5.

Over $670 million in crypto liquidations hit the market in 24 hours, with $533 million from longs, Coinglass data shows. The Squeeze Momentum Indicator has been active for nine bars with a reading of 0.25v — barely any bullish lift. On Myriad, traders are placing 65.7% odds on Bitcoin reaching $55,000 before $84,000.

The Federal Open Market Committee meets today and tomorrow, with Fed Chair Kevin Warsh's decision due July 29. Markets expect a rate hold at 3.50% to 3.75%, but the memory of Warsh's hawkish June presser has traders deleveraging. A dovish surprise could resolve the squeeze upward through the $65,302 Fibonacci zone, but the technical setup leans bearish.

The bounce to $66,921 generated optimism that the 200-day exponential moving average had held. Between Monday and Tuesday, Bitcoin lost all those gains, canceling the bullish trend and returning to bear territory. The current resistance runs parallel to the two prior lines that marked the dip from May to July and the longer slide from November to April — a pattern that preceded each leg lower.

The exponential moving average structure is unambiguously bearish. The 50 EMA sits below the 200 EMA with price below both — a death cross active for months. The Relative Strength Index at 46.5 sits below the neutral 50 threshold, not oversold enough to attract forced bargain hunters and not high enough to suggest buying momentum.

The broader macro backdrop adds pressure. South Korea's KOSPI index fell more than 8% at the open and triggered a circuit breaker, sending a risk-off shockwave through global markets. Oil fell 2%, gold dipped 1%, and Nasdaq futures turned red. The Dow was the outlier, up 1.2% on strength in Coca-Cola, Walmart, and Home Depot.

The bull case exists but is thin. A dramatically dovish Fed surprise tomorrow could be the external shock that resolves the squeeze upward. But right now, the bounce to $66,921 looks like what bull traps are supposed to look like: a run into resistance, a failed breakout, and a return to prior lows.

This article is for informational purposes only and does not constitute investment advice.