Bitcoin: What is the ‘death cross’ that heralds the sharp fall of this cryptocurrency?
For several weeks now, the price of Bitcoin has been a true roller coaster, with rapid rises, dizzying drops and unexpected turns. Yesterday, Wednesday, the price of the cryptocurrency was about to form the ‘death cross’ , a graph that could anticipate a sharp drop in its value .
In mid-March 2020, the price of Bitcoin (BTC) was around $ 5,000 and by December it was already at $ 19,000 . On January 7, 2021, the cryptocurrency reached $ 42,000 per unit , which is an increase of more than 800% in just ten months .
Just three days later, on January 11, BTC fell slightly below $ 30,000 , a loss close to 20% . Since then, its price has fluctuated between $ 31,000 and $ 35,000 , with peaks of up to $ 39,000 , but no more.
These fluctuations are reflected in the graphs of the cryptocurrency, whose lines were close to forming a figure known to presage upcoming devaluations .
What does the ‘death cross’ mean for Bitcoin?
It is a technical pattern that consists of the intersection of two lines , one formed by the 50-day moving average price and the other by the 200-day moving average price. Analysts see this chart as an indicator that a sharp decline is coming .
For example, the ‘death cross’ was observed at the beginning of the stock market crashes of 1929, 1938, 1974 and 2008, indicates Investopedia .
The variations of the Bitcoin gave rise to that almost a ‘cross of the death’ was formed in its graphs. This is because BTC’s 50-day moving average fell from $ 37,616 to $ 33,342 , while the 200-day moving average rose from $ 28,647 to $ 33,218.
The ‘death cross’ is a bad sign, yes, but it doesn’t necessarily indicate a significant and steady depreciation over the long term . In fact, Bitcoin experienced this phenomenon in August 2020 and it took almost 2 months to recover.
“The last cross of death was not the end of the world, but it caused a 15% setback. [Bitcoin] took 50 days to recover its price. From the current level […], a 15% decline would put Bitcoin at around $ 28,000 ” , commented experts from the company TradingShot cited by the Bitcoinist portal.
What can we expect from Bitcoin?
This week, the financial JP Morgan adjusted its predictions for Bitcoin and now they doubt that it will exceed $ 40,000 again , for two factors. The first is the possibility that investors will withdraw their earnings , anticipating a decline. The second are the so-called ‘hodlers’ , who are taking bitcoins out of the market to accumulate them, preventing other investors from buying them and injecting capital into the cryptocurrency.
If JP Morgan’s projections are met and BTC does not return to its all-time high, it will not fall too much, according to specialists.
Konstantin Anissimov , CEO of cryptocurrency exchange operator CEX.IO, believes that long-term investor demand will prevent Bitcoin from falling below $ 31,500 , according to statements collected by the RT portal.
The expert even ventures to predict, not only the recovery of BTC , but another rise in its price this 2021.
“Demand is growing, while the production rate of the coin is quite low, which could see the coin rise to $ 50,000 by the end of the first quarter of this year,” Anissimov predicted.
