The price of the flagship cryptocurrency Bitcoin ($BTC) has dropped by more than 10% over the past week to now trade at around $57,500 per coin, but the price drop saw the cryptocurrency teetering on the brink of a bearish technical pattern known as the “death cross.”
The cryptocurrency’s price action, according to a chart shared by financial data provider Barchart on the microblogging platform X (formerly known as Twitter), is leading to the formation of a death cross on its yearly chart.
Imminent Death Cross Formation for Bitcoin $BTC ☠️ pic.twitter.com/dNHB4TWf2z
— Barchart (@Barchart) August 7, 2024
A death cross, it’s worth noting, occurs when a short-term moving average drops below a longer-term moving average, in this case the cryptocurrency’s 50 moving average is dropping below its 200 moving average.
According to Investopedia, market history of death crosses suggests the signal “tends to precede a near-term rebound with above-average returns.”
Market observers pointed out that in October 2023, Bitcoin also faced a death cross where the short-term moving average crossed below the long-term moving average, but it was quickly inverted as the price of the cryptocurrency started surging.
That death cross was formed with Bitcoin trading at around $27,000 and was followed by a bull run to a new all-time high around $73,000 after the U.S. Securities and Exchange Commission (SEC) approved spot Bitcoin exchange-traded funds (ETFs) in the country in January 2024.
The death cross is forming after a mysterious buying spree gripped the Bitcoin market, with permanent holders accumulating nearly $23 billion worth of the cryptocurrency over the past month amid a surge in demand that has sparked speculation.
Notably, the recent cryptocurrency market sell-off saw the market’s Crypto Fear & Greed Index plunge into its lowest level in two years signaling “extreme fear” among investors for the first time since July 2022.
The index, which utilizes multiple sources, including social media, to produce a relative number that reflects investor sentiment, has risen from 6 when BTC dropped below $18,000 last year. Per the index, behavior in the cryptocurrency market is “very emotional” and people “get greedy when the market is rising which results in FOMO (Fear of missing out).”
Featured image via Unsplash.
