Bitcoin Breaks $90,000: A Bull Trap or the Start of a Real Recovery?

Bitcoin Rallies Past $90,000, But Are We Out of the Woods Yet?

The crypto market is buzzing with cautious optimism as Bitcoin (BTC) surged past the $90,000 mark this week. This move comes in tandem with a broader risk-on sentiment in the stock market, where the S&P 500 and Nasdaq have also been enjoying a multi-day winning streak. After dipping to a low of $81,000 last Friday, this rebound feels like a breath of fresh air for investors. However, seasoned market analysts are urging caution, suggesting this may not be the V-shaped recovery many are hoping for.

While the price action is encouraging, several underlying factors suggest the market remains on shaky ground. Is this a genuine trend reversal, or just a temporary relief rally in a persistent bear market? Let’s dive into the expert analysis and key indicators to watch.

The Disconnect Between Bitcoin and Traditional Markets

Historically, Bitcoin’s price movements have often mirrored the Nasdaq Composite, a benchmark for tech stocks. However, that relationship appears to be fraying. Torsten Slok, chief economist at Apollo Management, noted that this correlation has recently broken down, with Bitcoin experiencing a much steeper decline compared to its tech-stock counterpart.

Despite this recent bounce, it’s crucial to remember the bigger picture. Bitcoin is still trading approximately 28% below its all-time high of over $126,000, reached back in October. This significant drawdown highlights the volatility and underlying weakness that still plagues the market.

Macroeconomic Headwinds: The Fed and Government Spending

Many investors are pinning their hopes on macroeconomic catalysts to fuel the next bull run. The fourth quarter is historically a strong period for Bitcoin, but as strategists at 10X Research point out, these gains rarely materialize without a significant catalyst.

Will a Fed Rate Cut Save Crypto?

The market is currently pricing in a high probability of a 25 basis point rate cut by the Federal Reserve in December. While lower interest rates are typically seen as bullish for risk assets like crypto, the reality might be more complex.

According to 10X Research, Bitcoin’s price is more sensitive to the Fed’s communication and forward guidance than the mechanical act of cutting rates. Fed Chair Jerome Powell’s messaging will be critical. A dovish tone could spark a rally, but any hint of continued hawkishness—or a decision not to cut rates at all—could trigger a sharp market sell-off.

The Treasury Spending Theory Debunked?

Another popular theory is that increased spending from the Treasury General Account (TGA) will inject liquidity into the markets, boosting asset prices. However, historical data casts doubt on this direct causal link. The last time the TGA released a massive $522 billion, Bitcoin’s price initially dropped by 15%, or about $14,000. It took over two months for the market to bottom out and feel the effects of the increased liquidity.

If a similar two-month lag applies this time, we might not see any liquidity-driven impact on Bitcoin until late January 2026, meaning the market could continue to consolidate or even trend lower in the short term.

Technical Analysis: Key Price Levels to Watch

From a technical standpoint, analysts are identifying clear signs of a bear market rally rather than a sustainable uptrend.

Ed Engel, an analyst at Compass Point, warns that a defining trait of bear markets is “swift relief rallies followed by aggressive selling into strength.” He identifies the $92,000 to $95,000 range as a significant near-term resistance zone. If Bitcoin reaches these levels, it could face heavy selling pressure.

Before becoming more bullish, analysts like Engel are looking for two key signals:

• Net Accumulation from HODLers: A clear sign that long-term holders are confidently buying and holding Bitcoin, rather than selling into the rally.
• Aggressive Short Positioning: An increase in traders betting against the price, which can lead to a “short squeeze” if the price moves up, violently forcing shorters to buy back and fueling the rally.

Until these conditions are met, the risk of a downward move remains high. Engel expects Bitcoin to retest the ~$82,000 level and potentially break below $80,000. While strong support is anticipated in the $65,000 to $70,000 range, a retest of this zone is an increasing possibility.

Conclusion: Proceed with Caution

The recent surge in Bitcoin’s price is a welcome development, but it’s essential to look beyond the daily charts. The breakdown in correlation with traditional markets, uncertainty surrounding the Fed’s next move, and bearish technical patterns all signal that the crypto market is not out of danger. This could very well be a classic bull trap designed to lure in unsuspecting investors before the next leg down.

Investors should remain vigilant, watch the key resistance and support levels closely, and wait for clearer signs of strength from long-term holders before concluding that a true recovery is underway.