While mere days ago analysts were calling for Bitcoin (BTC) to correct higher to $9,000 and potentially even higher, this bullish scenario has not panned out. On the contrary, in fact. Since the weekend, the leading cryptocurrency has returned to $8,000 and has even started to flirt with the $7,000s once again.
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This renewed selling pressure has reignited the fears that things are about to get ugly for this market once again — (as if the 45% correction from $14,000 wasn’t bad enough).
Bitcoin Death Cross Looms
Analyst Chonis recently noted that Bitcoin’s 50-day and 200-day moving averages are currently preparing to see a “death cross” in the coming ten days.
For those not versed in technical analysis, a “death cross” is when a short-term moving average, often the 50-day as it is indicative of short-term trends, crosses below a long-term moving average, often the 200-day. As Investopedia accurately defines the term, “The death cross is a technical chart pattern indicating the potential for a major selloff.”
$BTC – “Death Cross” setting up on or about 10days “ish” from now …check out what happened in 2018 when the MA50 crossed down into the MA200 on the daily #bitcoin chart… pic.twitter.com/GkodPsv38g
— BIG Chonis (@BigChonis) October 17, 2019
Should this technical pattern come to fruition on Bitcoin’s chart, it will show that bears have control of this market. As Chonis pointed out, the last death cross, which was observed in 2018, marked the commencement of a long-term price correction.
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Not the End of the World
While the previous death cross seen in 2018 sent Bitcoin investors capitulating, it is important to note that this technical formation is not a definite sign of “doom”, so to speak. Look to the chart below as a case in point.
What I’m showing you above is mid-2015 to early-2016, the period after Bitcoin had bottomed and had begun to enter into a fresh long-term bull trend. As you can see, the white line, the 50-day moving average, crossed bearishly in September 2015 as Bitcoin consolidated after a price drop. What’s interesting in this case is that BTC didn’t fall further, instead, it actually started to creep higher. The same could take place here, albeit the odds of this scenario playing out are not 100%.
What’s more, there are still a number of signs showing that Bitcoin is at the start of a macro bull trend, not in a redux of last year’s brutal so-called “Crypto Winter.”
Analyst Mitoshi Kaku recently pointed out that Ichimoku Cloud’s (for Bitcoin’s one-month chart) first lead line has crossed above its second, flipping green for the first time in months. He wrote in a response to the inquiry about the indicator that this “could be the start of something beautiful”, referencing the idea that the Ichimoku Cloud is currently predicting that BTC is likely to see months, maybe years of positive price action.
That’s far from the end of it. In August, the three-day Bitcoin chart on Bitstamp printed a “golden cross” back in early-August. What’s notable about this is the last time this technical event played out was early-2016, February 2016. What followed this last golden cross was the rally from $500 to $20,000 — a jaw-dropping 4,000% move — in under 24 months, of course. Should history repeat from here, Bitcoin could reach $400,000 by mid-2021.
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Featured Image from Shutterstock
