Bull traps are more prevalent in speculative markets like cryptocurrency due to the inherent volatility, lack of regulation, and emotionally driven trading behaviour. In speculative markets, prices are often influenced by hype, rumours, and market sentiment rather than underlying fundamentals. This creates fertile ground for bull traps, where prices temporarily break above resistance levels, luring traders into believing in a sustained upward trend before reversing sharply.

The relatively low liquidity of many cryptocurrencies exacerbates this issue. In thinly traded markets, large players have less capital to manipulate prices, creating false breakouts that trigger a bull trap. Retail investors, driven by fear of missing out (FOMO), are more likely to chase these moves without fully analyzing their legitimacy.

Moreover, the lack of regulation in cryptocurrency markets allows for coordinated manipulation, such as pump-and-dump schemes, which often result in bull traps. The speculative nature of crypto trading also means that traders frequently rely on technical analysis rather than fundamental research, increasing the likelihood of being misled by false signals.

Finally, the 24/7 nature of crypto trading can lead to impulsive decisions, with traders reacting emotionally to short-term price moves, making them more vulnerable to bull traps in this high-risk, speculative environment.