Bitcoin (BTC) is up 40+% since the start of the new year. This is bringing some cheers to long-term hopefuls who believe the bear market is behind us and now is the time for growth.

But will this rally be sustained, or is it a bull trap? We think the case is stronger for it to be the latter, and here are 4 reasons why.

1. Traders are waiting for $25K to take profits

Traders, including key influencers, are all calling for a $25K BTC price (see below). This is usually a market manipulation strategy as some of them will take profits on their sub-$20K buys along the way. BTC may hit $25K, but may face huge selling pressure at that price. Given that $25K is just a 8% increase from today (not huge given the context), wait for the eventual drop before you make your investment. If you haven’t already got your investments in BTC by now (DCA or otherwise), it is better to hold off on taking a ‘long’ position for now.

2. US Fed will increase interest rates on Feb. 1

US Federal Reserve has been increasing interest rates with the hope to reduce inflation in the market. Any announcement regarding this has always been met with volatility in financial and crypto markets. It is on track to announce an increase in rates on Feb 1st – in five days. 
A hawkish stance (continued stance towards higher interest rates) will likely spook the markets next week and it could coincide with BTC’s rally towards $25K.

3. DXY – the US dollar index – is at a 8 month low

DXY, which attained a high of 114 last year, is now at a 8-month low near 102. Usually, BTC is inversely corelated with DXY and has been rallying in the last month as DXY has declined. Signs of a weak economy are beginning to show in the US. As global conglomerates announce job cuts, there is a fear that earnings of these companies will not be in line with expectations. When this happens, stock markets tank and DXY zooms. Earning calls are expected in the month of February.

4. The year after the bear market is usually mixed

We have shown this chart before. 2015 and 2019, the year after a bear market, usually had 5-6 red months. Given a strong positive start to 2023, we have to anticipate a red month soon. If February continues to be kind by any chance, March will likely be a brutal month. The best way to navigate the next quarter is 1) hold on to FOMO investments into Bitcoin and to deploy them post April; 2) continue to employ DCA as a strategy to gain exposure into the asset; and 3) stay away from investing in altcoins as Bitcoin dominance continues to be lower than 45% (likely will reach 50% in the upcoming months).