Will Bitcoin Death Cross Lead to Another Year-long Bear Market?

  


Bitcoin has dropped 8.5% this week but the move has been largely predicted. What is not being predicted just yet is another bear market lasting a year, but today’s death cross may indicate otherwise as that is exactly what happened the last time one appeared.

Bitcoin Death Cross Today

Like a scene from The Revenant, Bitcoin has been mauled by the bears this week. It started out in the usual territory in the low $8,000 price range on Monday where it has been for the past month. The technical indicators however were all flashing red and suggesting a downward breakout.

It has come as no surprise then that BTC dumped below $7,500 on Wednesday. The Bollinger band squeeze and declining historical volatility all signaled that movement but it is the death cross that is more worrying.

bitcoin

BTC prices daily – Tradingview

Today two of the most significant moving averages for Bitcoin price action have crossed over indicating a lot more pain could be ahead. The death cross is a long term trend reversal indicator that happens when a faster 50 moving average crosses a slower 200 moving average. This has just formed on the BTC daily chart according to Tradingview.com.

When this happened before, Bitcoin had fallen 60% from its peak of $20k to $8,000 where it was just a few days ago. It was March 2018 and BTC prices did not recover until a full year later.

Today’s death cross is at a similar price following a decline of 45% from the 2019 peak of $13,800. There is a possibility that Bitcoin may not start to recover until mid-2020 or later if the pattern repeats.

It has been widely accepted that the launch of Bitcoin futures at the end of 2017 killed that rally. It has even been reported that this was the intention of the US government before things got out of control. Now that futures are part of the market it is unlikely that there will be another monumental surge like the one in December two years ago.

Bitcoin is likely to make gains in a slower pace over a longer time, which is a healthier picture all round. What 2017 did was introduce the concept of hodling so even if a long bear market follows, it is unlikely that prices will drop lower than the 2018 bottom of $3,200. Add to that the notion that large institutional funds and exchanges have amassed a fair quantity of coins.

A very long period of consolidation around the $6k mark is a possibility until new money enters the markets as the halving approaches. There also may be a similar pattern to price action next year as a large correction follows the halving fomo as it has done after previous similar events.

Whatever happens, it will be a volatile ride for Bitcoin over the next 12 months. Buckle up!

Image from Shutterstock



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