Bitcoin’s (BTC) price action looks to be approaching a “death cross,” but one crypto analyst believes it might not be “so deadly” based on historical patterns. Instead, it could be a bear trap before Bitcoin enters a “super bull rally,” looking at a theoretical BTC’s seven-year super cycle.
A death cross is a bearish signal that occurs when the 50-day simple moving average (SMA) of an asset’s market price falls below the 200-day SMA.
Currently, Bitcoin’s 50-day SMA is at $62,141 and falling, indicating a potential crossover with the 200-day SMA at $61,676.
The looming crossover suggests that Bitcoin’s short-term momentum underperforms the long-term price impetus, which tends to spark heightened fear and impulsive reactions among investors.
From a historical perspective, the death cross has a poor record of accurately predicting future price trends. It often results in a “bear trap” – a reversal against a bearish move that may force traders to abandon their short positions in the face of rising losses.
To put this into perspective, Bitcoin analyst Timothy Peterson shared a historical chart showing BTC’s price performance one to two months following the occurrence of a “Death Cross.”
“#Bitcoin's' death cross’ is not so deadly,” Peterson said, explaining that this has happened eight times since 2015, with BTC price rallying 67% of the time, two months after the crossover.
“This has happened only 8 times since 2015. What happens next? 60 days later, Bitcoin was up 62% of the time. The median return was +18%.”
From the BTC/USD daily chart above, Bitcoin price confirmed a death cross on Sept. 12, 2023, triggering a major bear trap, with BTC bottoming out at $24,000 on the same day before embarking on an extended uptrend toward the new all-time high reached on March 14, 2024.
Therefore, it is important to note that the death cross could be unreliable as a stand-alone indicator.
At the time of publication, Bitcoin is trading at $55,056. Having failed to beat the resistance around $56,000, BTC could revisit the recent low of $49,050.
Related: 3 key Bitcoin price metrics highlight traders’ lack of enthusiasm.
Bitcoin’s imminent “super bull rally”
Pseudonymous trader Trader Tardigrade backed the bear trap thesis with the assertion that Bitcoin’s recent price drawdown to $49,000 is the beginning of a new “super bull rally” for BTC.
In an Aug. 6 post on X, the trader shared analysis from 2013 and said that the recent crash “finally printed a wick down under the support line,” mirroring the previous supercycle running from 2016 to 2018.
Trader Tardigrade’s analysis shows that Bitcoin price made a similar move in 2016, ushering BTC into a parabolic run that peaked in 2017. According to the analyst, the recent wick printed below the support line could be a signal for another all-time high in the following years.
However, it is worth noting that the proposed pattern has occurred only once and may need validation in the currency cycle. In addition, the “wick down” may have happened under different macroeconomic and geopolitical conditions, meaning things may not play out the same way they did in 2013-2018.
Meanwhile, DeFi Report founder Michael Nadeau says he is still bullish despite the events of the last week.
“The setup feels similar to Sept./Oct. 2020, after Paul Tudor Jones called Bitcoin the “fastest horse,” Michael Saylor started buying BTC via the MicroStrategy balance sheet.”
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
