Jun 8, 2021
Bitcoin Barrels Into ‘Death Cross’ as Chartist Backdrop Darkens
(Bloomberg) -- Amid Bitcoin’s decline this week, eagle-eyed chart-watchers noticed an ominous-sounding technical breach could be at hand: the coin is approaching a bearish pattern known as a death cross.
The world’s largest digital currency has slump, pushing its average price over the last 50 days close to its 200-day moving average. Should the short-term line cross below the long-term one, the coin would reach the forbidding formation. The indicator is typically seen as a closely-watched technical measure that could offer a hint at more pain to come.
The last time Bitcoin marked a death-cross was in November 2019 -- the cryptocurrency was down roughly 5% one month after crossing it.
While it’s not done so yet, “the collision seems unavoidable at this point,” wrote Mati Greenspan, founder of Quantum Economics. “A death cross could be an indication that prices may remain subdued for a while to come.”
Bitcoin has been mired in a downtrend spiral in recent weeks, losing about 45% since mid-April, when it hit a record high. The recent selloff was exacerbated by billionaire Elon Musk’s public rebuke of the amount of energy used by the servers underpinning the token. Increased Chinese regulatory oversight also soured the mood.
On Tuesday, Bitcoin tumbled as analysts pointed to a technical breakdown as well as the recovery of Colonial Pipeline Co.’s ransom as evidence that crypto isn’t beyond government control. The U.S. recovered almost all the Bitcoin ransom paid to the perpetrators of the cyber attack on Colonial last month in a sign that law enforcement is capable of pursuing online criminals even when they operate outside the nation’s borders.
In the meantime, chartists are eyeing the $30,000 level, which the coin briefly touched last month during a brutal selloff. Breaching that round-number mark, they say, could trigger another wave of selling given the lack of technical support between $20,000 and $30,000.
Still, Greenspan adds a caveat about the death-cross: it’s typically followed by a so-called golden cross, which tends to be a bullish signal. “If prices bottom out around here, we can probably expect a strong rally to resume once the market is ready for it,” he said.
©2021 Bloomberg L.P.