Minter
Quack AI
NEAR Protocol
Pearl
Sui
Pons
Quantus
The crypto market rally continued today, Dec. 3, as Bitcoin and other altcoins are in the green. Bitcoin price rose to $93,000, while the market capitalization of all coins rose by 6.2% in the last 24 hours to over $3.14 trillion.
The ongoing crypto rally could be the start of a bull run, or it could be a false breakout, commonly known as a dead-cat bounce. This article explores some of the top reasons to be cautious before buying Bitcoin and other altcoins.
Crypto Market Rally Could be a Dead-Cat Bounce
The first main reason to be cautious is that the ongoing crypto market rally could be a dead-cat bounce (DCB). A DCB is a situation where a falling asset rebounds briefly and then resumes the downtrend.
It is also known as a bull trap because it deceives traders into believing that a new bull run is starting, only for it to reverse.
Bitcoin and the crypto market have had several DCBs in the past few months. For example, Bitcoin price dropped to $103,420 on October 17, then rebounded to $117,342 on October 27, and subsequently resumed its downtrend.
Another dead-cat bounce happened earlier last month when it bottomed at $99,065, rebounded to $107,420, and then crashed.
Bitcoin Price Remains Below Key Indicators
The other main reason to be cautious is that Bitcoin price remains below key technical indicators. It is a sign that the bearish trend continues. BTC trades below the 50-day and 100-day Exponential Moving Averages (EMA), which have provided it with substantial resistance in the past few months.
At the same time, BTC remains below the Supertrend and the Ichimoku cloud indicators. In most cases, bullish reversals are usually confirmed when an asset moves above key trend indicators.
At the same time, as the chart shows, there is a risk that Bitcoin is slowly forming a bearish flag pattern. It is characterized by a vertical line and a rectangular consolidation. This pattern often leads to a strong bearish breakdown over time.
Crypto Fear and Greed Index is Still in Red
The other main reason to be cautious is that the closely-watched Crypto Fear and Greed Index remains in the red. Data compiled by CoinMarketCap shows that it has moved to the fear zone of 22.
On the positive side, most crypto rallies start when the gauge is in the fear or extreme fear zones. As such, the fact that the index has moved from last week’s low of 8 to 22 is a bullish sign.
However, it is also a sign that a sense of fear is present in the market, which may trigger panic selling among investors.
Investors May Sell the News
The crypto market rally has been triggered by several news events. For example, Vanguard has now embraced crypto. This move will enable its 50 million customers to invest in crypto ETFs.
Additionally, the market has reacted positively to news that Donald Trump may nominate Kevin Hassett to become the next Federal Reserve Chair. Hassett supports low interest rates and the crypto industry, as he has previously served as a Coinbase advisor.
The crypto market rally also happened as the Securities and Exchange Commission approved altcoin ETFs and announced that it would start an innovation exemption in January this year.
The odds that the Federal Reserve will cut interest rates have surged on Polymarket and Kalshi recently.
Therefore, there is a risk that crypto prices will recoil as investors sell the news. This is a situation where an asset rises before a major news event and then drops when it happens. For example, XRP and Solana prices rose ahead of their ETF approvals and then dropped even as their inflows accelerated.
Altogether, the crypto market bull run will be confirmed when the Fear and Greed Index turns green and Bitcoin moves above key moving averages.
