Bitcoin Price Undergoes Bearish “Death Cross” of SMAs, Rebound Possible?

Key Takeaways:

• Bearish Cross Emergence: Bitcoin price’s 50-day SMA has crossed below its 200-day SMA, signaling a potential bearish phase in the market.
• Historical Patterns: Previous death crosses led to significant Bitcoin price rebounds, with gains of around 50% within four months.
• Current Market Sentiment: Bitcoin price is currently around $58,000, reflecting short-term weakness and a 10.17% decline over the past 30 days.
• Potential for Reversal: Despite the bearish signal, analysts suggest that Bitcoin price could reclaim key levels and possibly test $70,000.
• External Factors: Recent US government Bitcoin transfers to Coinbase could impact market dynamics but are not immediately linked to selling pressure.

A concerning signal has emerged in the Bitcoin market as a key technical indicator flashes a bearish warning, causing fear and uncertainty among traders. As Bitcoin price falls below the critical $58,000 mark, the appearance of a “bearish cross” on multiple timeframes suggests potential short-term weakness, although historical trends hint at a possible rebound.

The “Death Cross” and Its Implications

The bearish cross, often referred to as the “death cross,” is a technical analysis pattern that occurs when the 50-day simple moving average (SMA) of Bitcoin price dips below the 200-day SMA. This formation is generally seen as a bearish signal, indicating a possible downturn in the asset’s price. On August 15, the 50-day SMA for Bitcoin price stood at $61,749, while the 200-day SMA was slightly higher at $62,485, as reported by BuyBitcoinWorldwide.

BTC/USD | Source: TradingView

At the time of writing, Bitcoin price is hovering at $58,200, falling short of the key SMA levels that traders closely monitor. The crypto has experienced a 10.17% decline over the past 30 days, as per data from CoinMarketCap, raising concerns about the near-term outlook.

Mags, a well-known pseudonymous crypto trader, highlighted this bearish development in an August 15 post on X (formerly Twitter), noting that the death cross signifies “short-term weakness in the market.” This sentiment is shared by many traders who use this cross to assess Bitcoin’s recent price strength relative to its broader market performance.

Read On: Bitcoin Price Prediction

Potential for Reversal Despite Bearish Signals

While the death cross typically signals a bearish phase, historical data suggests that it might not necessarily spell doom for Bitcoin. In fact, previous instances of this pattern have been followed by significant price recoveries. Mags pointed out that in past occurrences, Bitcoin price surged by approximately 50% within four months following the formation of a death cross.

For instance, in September 2023, Bitcoin’s 50-day SMA fell below the 200-day SMA when the price was trading around $26,578. Four months later, Bitcoin price saw a robust 49% increase, reaching $39,518. Similarly, in July 2021, a death cross appeared when Bitcoin was trading at $34,671. Within four months, the price had risen by 54% to $54,813.

These historical patterns suggest that while the current death cross indicates short-term market weakness, it could also be a precursor to a significant upward movement. Mags emphasized that a bullish confirmation would involve Bitcoin reclaiming its moving averages, followed by a bullish cross, which could signal the start of a new upward trend.

Market Sentiment and External Factors

Tony Sycamore, a market analyst at IG, noted that for Bitcoin to regain stability, it needs to reclaim the 200-day moving average at $62,432. If this level is achieved, it could pave the way for a test of the trend channel resistance near $70,000. However, until Bitcoin reclaims these key levels, the market is likely to experience continued volatility.

Despite the bearish signal, some analysts believe that the death cross could trigger a strong reversal in the coming months. Mags cautioned that if the pattern repeats, Bitcoin might experience a few weeks of choppy price action before any significant recovery occurs.

Impact of External Market Movements

In addition to the technical indicators, external market factors could also influence Bitcoin price movement. Recently, the U.S. government transferred nearly $600 million worth of Bitcoin to Coinbase, sparking speculation about potential selling pressure. However, Ryan Lee, chief analyst at Bitget Research, noted that this transfer does not necessarily mean that the Bitcoin has been sold. The U.S. Marshals Service has partnered with Coinbase Prime to manage and trade large digital assets, which could mitigate immediate selling pressure on the market.

Conclusion: A Mixed Outlook

As Bitcoin navigates through this critical phase, the bearish cross has undoubtedly raised alarm among traders. However, historical data suggests that this pattern might not be as bearish as it seems, with the potential for a significant price rally in the coming months. For now, traders are advised to closely monitor Bitcoin’s interaction with key moving averages and remain cautious of potential volatility. Whether Bitcoin will rebound as it has in the past or continue its downward trend remains to be seen, but the next few weeks will be crucial in determining the crypto’s direction for the remainder of 2024.

Source: CoinTelegraph