The Death Cross Returns
The price of the bitcoin is again threatened by another death cross on the chart – a condition whereby the 50- day moving average is crossed by the 200- day moving average. This is usually regarded as bear signal by the traders and investors resulting into fears of a prologued downtrend. Nevertheless, as it became clear from the above analysis of Bitcoin’s past death crosses, this indicator has not always provided accurate signals of further price movement.
A Lagging Indicator
It is important to note that a death cross is a bearish pattern, which is a lagging indicator that depends on the previous trends. It indicates that the short-term moving average has declined or crossed over with the long-term moving average in the wrong direction. Yet, the properties of momentum may have recently yielded, and this does not necessarily mean that it will keep on deteriorating. The death cross on its own does not give much signal whether it will indeed culminate in a major downturn.
False Alarms
The last death cross in September 2022 was an actual bear trap within the framework of the concept described above. BTC reached a low of $24k on the cross date then quickly recovered to make new record highs by early 2023. Discouragingly, 5 of the past 9 death crosses have not been followed by more than a 9-day downtrend; hence, it is a poor track record for generating good signals.
External Factors At Play
It is observed that Bitcoin’s near future especially its short-term trend relies more on the outside factors that are the macro-economic factors and not the technical factors. Further dollar and Japanese yen strength is likely to remain an area of concern for risky assets such as bitcoins and other cryptocurrencies. Instead potential drivers involve global recession, inflation rates as well as central banking policies.
Wait For Confirmation
As much as the death cross signal can be misleading, it is advised that traders wait for a bearish trend in the price to commence before choosing a side. For instance, if the price falls below crucial psychological and technical support levels particularly the $40, 000 mark, then there would be more conviction in the new downtrend. Going long means getting caught on the wrong side – akin to those caught on the wrong side after the last death cross in September 2022.
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