Bear Trap

A Bear Trap is a trading manipulation technique used by a group of traders or a large whale, where large amounts of a currency are sold at the same time, breaking local price supports.

The manipulators, by dumping their holdings, hope to drive prices down for all other market participants to see.

Those participants think a price correction is occurring, so they sell their holdings or enter in a short position.

It’s at this point in the bear trap that the manipulators buy back their assets at a lower price, again all at the same time, and price reverses, shooting back up.

The manipulators are in profit, and the bears – the sellers – either sold for a loss or small gain or are trapped in a short position.

Related Terms

Bull

A bull is a trader or investor that believes the price of an asset or market will increase for a prolonged period of time

Bear

A Bear is a cryptocurrency trader or investor that believes the price of an asset or market will decline for a prolonged period of time. Someone who believes this is said to have “bearish” sentiment, or a bearish attitude toward the market and its future price movements.

Bear Market

A Bear Market describes a cryptocurrency market where declining prices are the trend. Prices decline for a prolonged period and investors and traders believe that prices will continue to do the same. Trader confidence is low in that prices will maintain or increase.

Bear Whales

Bear Whales use their capital “size” to drive down cryptocurrency prices in hopes of profiting from the price decline. Whales can place and remove sell walls on a CEX’s order book continuously, manipulating other traders to sell off their assets early because they see the sell wall.

Desktop Wallet

A common type of crypto wallet used to securely store and manage your private keys on a computer hard drive. They’re considered more secure than web-based wallets, since you can only access them from wherever your computer is located, and again, you control your private keys.