A bear trap is false technical indication that occurs when the performance of a market incorrectly signals a reversal of a rising price trend. This can occur in all types of markets including cryptocurrency.
A bear trap will make it seems like an asset will experience a downward turn, thus prompting mass selling and further driving down its price. A bear trap will generally involve several traders who have significant combined holdings of a cryptocurrency.
Together, they will arrange to sell a large amount of coin at the same time to drive down its price. At this point, the bear trap will release, and the group will buy back their assets at a lower price. The value of the coin then rebounds, and the trap setters have made a profit from the difference. Bear traps originated on the stock market, but their technique is similar in cryptocurrency.
The bear trap is a typical trading tactic that inexperienced investors should be aware of.