Originally published on: August 16, 2024
In the world of cryptocurrency trading, a critical indicator for Bitcoin is causing concern as it signals a potential downward trend. The occurrence of a “bearish cross” is hinting at further decline for the popular digital asset, but some experts believe this could actually present an opportunity for savvy investors.
Decoding the Bearish Cross: What Does It Mean?
The alarm was first raised by a well-known crypto trader known as Mags, who identified a “bearish cross” on Bitcoin’s daily chart. This phenomenon, also known as a “death cross,” occurs when the 50-day simple moving average (SMA) of Bitcoin’s price drops below the 200-day SMA.
As of August 15, Bitcoin was facing a 50-day SMA of $61,749, while the 200-day SMA was recorded at $62,485, according to BuyBitcoinWorldwide data. Currently, Bitcoin is trading under the critical threshold for traders at $58,077, according to CoinMarketCap.
Implications for Traders and Investors
Mags highlighted that the bearish cross signifies a period of short-term weakness in the market. This cross is closely monitored by traders to assess the recent performance of Bitcoin in comparison to its overall trajectory.
In the words of IG market analyst Tony Sycamore, Bitcoin needs to reclaim the 200-day moving MA at $62,432 in order to stabilize and potentially challenge the trend channel resistance near $70k.
Despite the cautionary signals, Mags suggested a silver lining. Historical data indicates that in the past occurrences of a death cross, Bitcoin’s price surged by approximately 50% within four months.
For instance, in September 2023, when the 50-day SMA fell below the 200-day SMA with Bitcoin trading at $26,578, its price soared 49% to $39,518 within four months. Similarly, in July 2021, Bitcoin’s price saw a 54% increase to $54,813 four months after the bearish cross was observed.
Outlook and Future Possibilities
Mags emphasized that a bullish confirmation would entail reclaiming the moving averages followed by a positive bullish cross. However, the potential for choppy price action in the coming weeks cannot be ruled out.
In other recent developments, the United States government transferred nearly$600 million worth of Bitcoin to Coinbase, a significant move that is unlikely to trigger immediate selling pressure in the market.
As always, it’s crucial to remember that investing in cryptocurrencies carries inherent risks, and it’s wise for readers to conduct thorough research before making any trading decisions. Stay tuned for more updates on the evolving crypto landscape.
