How to spot bull and bear market traps in crypto before they catch you

💡 DMK Insight

Fake breakouts are a trader’s nightmare, and understanding funding rates, open interest, and volume can save you from costly traps. Right now, with volatility in crypto markets, many traders are getting caught in false moves. Funding rates can indicate market sentiment; if they spike, it often signals over-leveraged positions that could lead to a sharp reversal. Open interest (OI) can also provide clues—rising OI with price increases might suggest genuine interest, while a drop in OI could indicate profit-taking or liquidation. Volume is crucial too; low volume during a breakout often means it lacks conviction. Here’s the flip side: while these indicators are helpful, they can also mislead if interpreted in isolation. For instance, a sudden spike in funding rates might not always precede a downturn; it could also signal a strong trend continuation. Keep an eye on key levels where these indicators converge, as they can provide strong signals for entry or exit. Watch for significant changes in these metrics over the next week to gauge market direction.