For the first time in five months, a bearish “death cross” pattern appears to appear on the Bitcoin four-hour chart, warning of additional losses in the short term.
However, recent history shows that the pattern may not result in a prolonged bearish period for the benchmark cryptocurrency. For example, its last occurrence coincided with an 18 percent drop in BTC / USD in August 2020 to $ 9,813.
Even so, supportive fundamentals helped the pair fully offset its losses, followed by a wild surge to an all-time high near $ 42,000 in January.
It shows that the past death crosses have appeared a lot near Bitcoin’s local ground.
The BTC / USD exchange rate fell nearly $ 10,500, or 25 percent, to nearly $ 31,800 after closing at its record high amid growing inflation fears and the depreciation of the US dollar. The pair previously posted monthly gains that rose more than 1,000 percent from their mid-March low of $ 3,858 (data from Coinbase).
On Wednesday, Bitcoin’s 50-day moving average fell by $ 33,342 from its session high of $ 37,616, while its 200-day moving average rose from $ 28,647 to $ 33,218.
Bitcoin to $ 28,000
A death cross occurs when the 50-DMA, which many chartists treat as a short-term trend indicator, closes below the 200-DMA, which traders view as a benchmark between longer-term uptrends and downtrends. Bitcoin is on the verge of forming a similar pattern on its short-term chart, signaling a sell-off in the upcoming sessions.
“The last death cross,” according to analysts at TradingShot, “wasn’t the end of the world, but it provided a 15 percent retreat.” It took BTC / USD 50 days to win the prize back [after the bearish crossover]. As of the current state of the 4H MA200, a -15% pullback would bring BTC to around $ 28,000. “
Meanwhile, TradingShot also envisioned a 50-200 crossover scenario based on the recent history of Bitcoin’s moving averages. For example, the two MAs approached the formation of a death cross in December 2020 but did not make bearish contact. It later led to an aggressive bullish wave.
“We are already seeing a little channel-up formation (within the channel-down) which is encouraging,” said TradingShot analysts, referring to the graph above.
All is [Still] Well
Many analysts agree that further slumps in the Bitcoin market would attract accumulators, especially investors with long-term optimistic outlook for the cryptocurrency.
Konstantin Anissimov, Executive Director at Crypto Exchange CEX.IO, noted that BTC / USD has apparently bottomed near USD 31,500. The analyst added that the path of the cryptocurrency is pointing up in the coming monthly sessions.
“Demand is growing while the rate of production of the coin is quite low, which could cause the coin to climb to $ 50,000 by the end of the first quarter of this year,” he told Bitcoinist.