Bitcoin’s (BTC) price woes may not be over just yet, as a technical configuration known as a death cross seems to be impending. This price pattern has historically sparked heightened fear and impulsive reactions among traders.
The onset of a dreaded death cross could limit upside moves for the largest cryptocurrency. Therefore, prices could be in for a deeper slide in the short term.
Looming Death Cross Could Spoil BTC’s Upside Outlook
Bitcoin’s bear market might have plenty of steam left as technical analysis indicates a death cross is fast approaching.
Imminent Death Cross Formation for Bitcoin $BTC pic.twitter.com/dNHB4TWf2z
— Barchart (@Barchart) August 7, 2024
A dreaded death cross happens when the 50-day simple moving average (SMA) of an asset’s market price slips below the 200-day SMA. The leading cryptocurrency is currently trading for $59,597 on CoinGecko, representing an 8.7 percent increase on a 24-hour basis. At present, the Bitcoin price’s 50-day SMA is at $62,488 and falling, indicating a potential crossover with the 200-day SMA at $61,664.
The looming bearish crossover suggests that Bitcoin’s short-term momentum is underperforming the long-term average. Short-term traders often see a death cross pattern as a bearish signal. However, it does not necessarily mean future moves will follow the same direction. Moreover, long-term hodlers who persevere through the distress of a bearish phase are usually rewarded with handsome returns after remarkable recoveries.
The last time Bitcoin encountered a death cross was in September 2023 — which was arguably one of the most bearish months in the history of Bitcoin. The cryptocurrency carved a bottom just below the $25,000 mark the same day before eventually skyrocketing by nearly 200% to hit a new all-time high above $73,700 six months later.
Bitcoin has tumbled 31% between its highest price on July 29 and its lowest on August 5. The forthcoming crossover and the resulting price decline could be the final leg of the current bear market.
Lingering Uncertainties
Looking ahead, trading firm QCP Capital advised traders to observe macro correlations.
“While the initial shock may have passed, we foresee continued selling pressure in the coming days as systematic funds continue to pare exposure in light of the heightened volatility,” QCP recently told its Telegram channel subscribers.
“We recommend keeping a close eye on Nasdaq, Nikkei, and USDJPY as cross-asset correlations remain high in the near term.”
QCP then emphasized that crypto holders should now focus on long-term strategies.
“With the acute phase of market volatility over, we favor establishing longer-term bullish positions in anticipation of a cutting cycle. We prefer trades with a 3-6mth time horizon to prevent getting chopped given higher volatilities,” the experts summarized.
