A key Bitcoin indicator is raising new alarm bells among crypto traders, with a “bearish cross” signaling the asset may be headed for further decline — though history suggests this could actually be a good sign.
“Bitcoin just printed a bearish cross on the daily chart,” pseudonymous crypto trader Mags wrote in an Aug 15 X post.
Mags was referring to the “death cross” a bearish signal that occurs when the 50-day simple moving average of Bitcoin’s
BTC
tickes down
$58,435
price falls below the 200-day SMA.
On Aug. 15, Bitcoin’s 50-day SMA was $61,749, while its 200-day SMA stood at $62,485, according to BuyBitcoinWorldwide data.
At the time of publication, Bitcoin’s price is below the key level for traders, at $58,077, as per CoinMarketCap.
According to Mags, the move signals “short-term weakness in the market.” The traders closely watch this cross, which measures Bitcoin’s recent strength against its broader performance.
“It needs to reclaim the 200-day moving MA at $62,432 to stabilize and open up a test of trend channel resistance near $70k,” IG market analyst Tony Sycamore added.
It could also mean a strong reversal is on the way.
In fact, according to Mags, the death cross is actually a good sign.
Historically, this has happened to the price of Bitcoin on two instances where it rallied about 50 percent four months later.
The Bitcoin 50-day SMA fell below the 200-day SMA in September 2023 with its price trading at $26,578. Just four months later, its price surged 49 percent to $39,518.
In July 2021, the 50-day SMA was as low as $34,671 versus the 200-day SMA at $44,680. Just as simply four months since the cross, Bitcoin’s price rallied 54% to $54,813.
“The bullish confirmation will be a reclaim of the MA’s followed by a nice bullish cross,” Mags added.
However, Mags told me, “if the pattern repeats, we might see a few weeks of choppy PA here”.
This comes after Cointelegraph recently reported that the U.S. government transferred almost $600 million worth of Bitcoin to Coinbase, but it’s unlikely to turn into selling pressure.
According to Ryan Lee, chief analyst of Bitget Research who told Cointelegraph, this does not mean 10,000 Bitcoin have been sold yet. He notes that the US Marshals Service only recently partnered with Coinbase Prime for handling and trading large digital assets.
FAQs
1. What is a ‘bearish cross’?
A bearish cross, also known as a “death cross,” occurs when a short-term moving average (typically the 50-day moving average) crosses below a longer-term moving average (such as the 200-day moving average). This is considered a bearish signal, indicating potential further downward movement in price.
2. Why did Bitcoin drop below $58K?
Several factors could have contributed to Bitcoin’s drop below $58K, such as negative market sentiment, increased regulatory pressures, macroeconomic factors, or technical analysis signals like the bearish cross.
3. What does the bearish cross indicate for Bitcoin’s future price?
The bearish cross suggests that Bitcoin may experience more downward pressure in the near term. Historically, this pattern has often been a precursor to extended price declines, though it is not always a guaranteed indicator of future performance.
4. How significant is Bitcoin falling below $58K?
The $58K level has been an important support level for Bitcoin. Falling below it could signal weakness in the market and potentially open the door for further declines if other support levels don’t hold.
5. Can Bitcoin recover after a bearish cross?
Yes, Bitcoin has recovered from bearish crosses in the past. While it is considered a negative signal, market conditions can change, and positive developments or news could lead to a reversal.