Bitcoin traders are on high alert after a critical technical indicator, known as the “death cross,” signalled a potential downturn in the cryptocurrency’s price trajectory. As Bitcoin dipped below $58,000, this ominous pattern has sparked concerns, though historical trends suggest a possible silver lining.
On August 15, Bitcoin’s 50-day simple moving average (SMA) fell below its 200-day SMA, marking what traders refer to as a “bearish cross.” This event, often dubbed the “death cross,” typically signals weakening short-term momentum in the market.
According to BuyBitcoinWorldwide, the 50-day SMA was recorded at $61,749, while the 200-day SMA stood slightly higher at $62,485 on that day. At the time of writing, Bitcoin’s price has further slipped to $58,077, based on data from CoinMarketCap.
Traders Brace for Market Volatility
The death cross is a significant technical indicator that traders monitor closely to assess Bitcoin’s recent market strength. As Tony Sycamore, a market analyst at IG, noted, Bitcoin would need to reclaim the 200-day moving average at $62,432 to stabilize. This recovery could potentially pave the way for Bitcoin to test the resistance near the $70,000 mark.
However, while the death cross traditionally signals bearish momentum, some experts, like the pseudonymous trader Mags, suggest it could also indicate an upcoming reversal. Historically, Bitcoin has shown resilience following similar patterns. For instance, in September 2023, after a similar death cross, Bitcoin’s price surged nearly 50% over the subsequent four months. A similar scenario unfolded in July 2021, where the price rallied by 54% following the Death Cross.
Impact of Recent Bitcoin Transfers by the U.S. Government
Despite the current bearish signal, the possibility of a strong market reversal remains. Mags pointed out that if Bitcoin manages to reclaim the moving averages, it could trigger a “bullish cross,” potentially leading to significant gains. However, traders should be prepared for a period of volatility, as the market might experience “choppy price action” before any clear trend emerges.
This development comes on the heels of reports that the U.S. government recently transferred nearly $600 million worth of Bitcoin to Coinbase. Although this move raised concerns about potential selling pressure, Ryan Lee, the chief analyst at Bitget Research, clarified that these assets have not been sold yet. The U.S. Marshals Service is reportedly working with Coinbase Prime to manage and trade these large digital assets, suggesting that the market impact might not be as severe as initially feared.
Also Read: Goldman Sachs’ $400M Bitcoin ETF Holdings Signal Shift in Stance on Crypto
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