#Bitcoin's 50-day simple moving average (SMA) is inching closer to its 200-day SMA, a potential sign of trouble.
Bitcoin crashed to a daily low of $49,577 yesterday and could be on the brink of a death cross, a pattern that has historically spooked traders and stirred up a storm of pessimism.
This ominous-sounding phenomenon in technical analysis occurs when the 50-day simple moving average (SMA) dips below the 200-day SMA, indicating that short-term momentum is lagging behind the long-term average. At its current price of $56,386, the 50-day SMA is at $62,488, while the 200-day SMA is at $61,664.
A death cross is seen as a bearish signal among short-term traders, but—despite its name—does not necessarily mean impending disaster. History has proven that long-term hodlers who are capable of going through the pains of a bearish period are often rewarded with huge gains after phenomenal recoveries.
The last time Bitcoin faced a death cross was in September 2023—which happens to be among the most bearish months in Bitcoin’s history. The cryptocurrency bottomed out below $25,000 at the time, only to register a 190% rise breaking past the $70,000 price line six months later.
Yet, the death cross's reputation precedes it, often triggering panic among inexperienced traders who leap to dire conclusions with limited information—especially when market sentiment is already gloomy. Indeed, Bitcoin has plunged 30% between its highest price on July 29 and its lowest price on August 5, which is worse than the Nasdaq and the SP500 did in the same period.
However, seasoned crypto traders seem less rattled by the looming death cross than their mainstream counterparts.
“If you are like most crypto investors, you’re cycling through a brutal swing of emotions, including fear and despair. For many, the emotion that strikes hardest is anger,” Matt Hougan, the CIO of Bitwise tweeted yesterday, “I feel those emotions too. But I feel something else too—something born from six-plus years of managing money in crypto full-time: Opportunity. Because I've seen this movie before.”
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