FLOKI’s bull trap plays out! Memecoin drops 13% in 36 hours

Key Takeaways

What sparked FLOKI’s bull trap?

The bullish move for Bitcoin gave the altcoin market short-term confidence, and its quick retreat swung the sentiment bearishly, taking FLOKI traders on a volatile ride.

What’s next for FLOKI?

The on-chain metrics did not reveal significant accumulation from holders. Combined with its recent bearish momentum, bulls should not bet on a recovery just yet.

The Open Interest behind FLOKI [FLOKI] saw a triple-digit percentage jump on the 21st of October.

Together with sizeable derivative inflows, the signs appeared to point toward strong bullish momentum, but AMBCrypto reported that a bull trap for FLOKI was possible.

The memecoin did indeed see its short-term bullishness fade after the 40% rally. In the 36 hours prior to the time of writing, FLOKI has shed 13.4% in value, failing to scale the local supply zone at $0.000084.

Source: Axel Adler Jr on X

The rejection came on the back of heightened volatility for Bitcoin [BTC]. Crypto analyst Axel Adler Jr observed that the Bitcoin volatility index rose above 95% for the third time within a month.

It was a warning sign that traders should expect sharp price moves.

Source: FLOKI/USDT on TradingView

This helped explain the bull trap that FLOKI witnessed in the past 36 hours. Despite the rejection at the supply zone at $0.0084, the market structure of FLOKI on the 1-day chart was bullish.

This internal structure shift came after the local swing high at $0.0000785 was breached during Monday’s rally. However, the Awesome Oscillator continued to flash bearish momentum.

The A/D volume indicator showed buying pressure was neither powerful nor consistent enough to force an uptrend from here.

While the internal structure shift was a bullish outcome, swing traders must remain wary of going long.

On-chain metrics signal more trouble for FLOKI bulls

Source: Santiment

The mean coin age saw an abrupt drop on the 11th of October, after the massive liquidation cascade on the 10th of October. The dormant circulation also saw a huge spike.

Together, they showed a high amount of token movement between wallets, a classic sign of a wave of selling.

Over the past few days, even though the daily active addresses metric has picked up, the mean coin age has remained flat.

This showed that a network-wide accumulation phase was not underway. It reinforced the idea that FLOKI bulls should remain cautious.