Home Cryptocurrency Bitcoin ‘death cross’ watch. What could the technical omen portend?

Bitcoin ‘death cross’ watch. What could the technical omen portend?

by Serge Shlykov

A death cross is a technical indicator which measures how far the price of Bitcoin has fallen against its 200-day moving average. When an asset’s price falls below its long term trading range, it signals that bears are in control and expect the trend to continue.

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While market sentiment has remained in the “severe anxiety” range for the previous 24 hours, the price of Bitcoin battled its way up 2.9 percent.

To put this sentiment in a broader context, the International Monetary Fund (IMF) issued a warning in conjunction with the Federal Reserve’s announcement that it would raise interest rates to fight inflation, citing a growing link between the cryptocurrency and equity markets as a threat to financial stability.

Market watchers believe Bitcoin will shortly pass the “death cross,” although it is still unclear how accurately the technical chart pattern can forecast future price movement.

“Death cross”

After falling as low as $39.7 on January 10, the price of Bitcoin is presently hovering at $43.7.

Market watchers are not persuaded that Bitcoin’s impending “death cross” portends doom for the cryptocurrency, despite the fact that Bitcoin is moving toward it.

A cross is formed when the 50-day moving average (MA) crosses the 200-day MA, and this specific technical pattern, which is looming over the Bitcoin price chart, is often seen as a bad market portent.

50-day MA (blue) and 200-day MA (yellow) crossing paths (TradingView)

The prospect of it is uncomfortable, particularly when investors are anxious, which seems to be the case based on the Bitcoin fear and greed index, which has been stuck in the negative for weeks.

Extreme Fear ranks 22 on the Bitcoin Fear and Greed Index. $42,843 as of today’s date. twitter.com/kdPFLdhV3V

— Bitcoin Fear and Greed Index, January 12, 2022, @BitcoinFear

But looking at Bitcoin’s death-cross patterns in the past doesn’t really make the interpretation any clearer.

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Bitcoin could be able to evade the death cross.

The previous time MAs produced a death cross, prices dropped by over 20% before bottoming out a month later in June 2021.

Just a short reminder that this significant market decline should be seen in a broader perspective, since the Bitcoin hash rate significantly decreased when China began to enforce its ban.

However, the price bottomed out following a prior bearish death cross in March 2020, thus there was no barrier to increases. Two months later, it actually took a higher bend and created a “golden cross.”

Quantum Economics’ creator, Mati Greenspan, stated:

It seemed inevitable at this time. The two MAs are approaching one another and will probably cross this week or early the next.

But according to Greenspan, a bear market isn’t definitely in the cards.

What we’re seeing is previous data and is not a prediction of what will happen in the future, as with any technical indicators and charting information, he said.


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