Bitcoin, Crypto Market’s $400B Recovery Could Be a Bull Trap

Bitcoin (BTC) and the broader crypto market have staged a remarkable comeback in recent weeks.

Notably, the total crypto market capitalization has rebounded from approximately $2.45 trillion to $2.85 trillion, marking a $400 billion recovery since March 10.

However, this bullish momentum may be misleading.

Technical indicators show the market is painting a rising wedge, a classic bearish reversal pattern. Simultaneously, macroeconomic headwinds—from resurgent inflation fears to renewed trade tensions—are fueling skepticism about the sustainability of risk-on assets, including crypto.

Let’s examine these factors in detail.

Bearish Pattern Forms in Total Crypto Market Cap Chart

The 4-hour chart of the total crypto market cap (ticker: TOTAL) highlights a rising wedge pattern, which typically precedes a breakdown. The price has been printing higher highs and higher lows, converging toward an apex, while volume thins out, another hallmark of a weakening rally.

Importantly, the price is hovering just above the 200-4H exponential moving average (20-4H EMA; the blue wave) at $2.82 trillion. A clean break below this level could confirm the bearish structure and trigger a rapid move to the downside.

The wedge’s projected breakdown target sits around $2.61 trillion, implying a potential 8–10% drop from current levels.

The Relative Strength Index (RSI) is also nearing overbought territory at 65, suggesting waning bullish momentum. If RSI dips below 50 in the coming sessions, it would strengthen the bearish case for a short-term correction.

S&P 500 Correlation Implies Broader Risk Exposure

The crypto market is not trading in isolation.

A 52-week correlation coefficient between the TOTAL market cap and the S&P 500 index currently sits at +0.70, underscoring how closely crypto assets track traditional equities. This high correlation means that any weakness in the stock market could spill over into digital assets.

Recent economic data points toward rising uncertainty.

U.S. consumer confidence fell to its lowest level in four years, and Bank of America reports that institutional clients turned net sellers of U.S. equities for the first time in two months. Wall Street banks are divided: while JPMorgan and Morgan Stanley anticipate a short-term rally, European giants like UBS and HSBC are sounding the alarm.

HSBC, in particular, issued a double downgrade on U.S. stocks and warned that Trump’s new round of tariffs—scheduled for April 2—could further destabilize markets. If equities falter under these pressures, crypto’s high beta nature makes it likely to follow suit.