Bitcoin (BTC) formed a trading pattern on January 8, which is widely followed by traditional charters for its ability to predict further losses.
In particular, the 50-day EMA (50-day EMA) fell to the cryptocurrency below the 200-day EMA (200-day EMA), forming the so-called death cross. This pattern emerged as Bitcoin went through a tough period in the last two months, falling more than 40% from the highest level of $ 69,000.
Daily BTC / USD price chart. Source: TradingView
Throughout history, death
Past death tolls have been negligible for Bitcoin over the past two years. For example, a bearish 50-200 day EMA crossover appeared in March 2020 after the price of BTC fell from around $ 9,000 to below $ 4,000, which was later than forecast.
Moreover, the appearance did little to prevent Bitcoin from rising to around $ 29,000 by the end of 2020, as shown in the chart below:
BTC / USD daily price chart showing the cross of death for March 2020. Source: TradingView
Similarly, the death cross that appeared on the daily bitcoin charts in July 2021 – as it did in March 2020 – was more delayed and less predictable. Their appearance did not lead to a large-scale sale. Instead, the BTC price consolidated sideways before climbing to $ 69,000 by November 2021.
BTC / USD daily price chart showing the cross of death. Source: TradingView
However, the bearish moving average transition in both cases, as mentioned above, brought good news that may have limited its impact on the bitcoin market.
For example, the Bitcoin price recovery in July 2021 came mainly after rumors that Amazon would start accepting cryptocurrencies for payments that later turned out to be fake, and after a conference called “B Word”, where Twitter CEO Jack Dorsey, CEO of Tesla Elon Musk and Katie Wood, CEO of ARK Invest, are for bitcoin.
Similarly, Bitcoin jumped sharply from its levels below $ 4,000 in March 2020, primarily after the US Federal Reserve announced its loose monetary policy to limit the fallout from the stock market crash caused by the coronavirus pandemic.
The cross of death looks dangerous this time
The recent decline in bitcoin reflected investors’ concerns about the Fed’s decision to aggressively reverse its loose monetary policy, including canceling a $ 120 billion-a-month buying program, followed by three price increases in 2022.
Higher interest rates usually make owning volatile assets such as bitcoin less attractive than government bonds, which provide guaranteed returns.
“This shows that Bitcoin acts as a risky asset,” Noel Acheson, head of market analysis at cryptocurrency lender Genesis Global Trading, told the Wall Street Journal, adding that short-term coin holders would be “closest to exit.” ”
RELATED: Bitcoin could break down in September at $ 30,000, warns trader
As a result, a general fall in cash, along with the formation of the death cross, could lead to further sales in the bitcoin market. However, this is possible if the price of BTC does not bounce off the current support level close to the $ 40,000, 0.382 Fibonacci line shown in the chart below.
BTC / USD daily price chart showing Fibonacci retracement levels. Source: TradingView
However, a break below $ 40,000 could send the bitcoin price to the next Fibonacci guideline of around $ 35,000.