Here’s What Historical Data Suggests About Bitcoin’s Near-Death Cross
According to Crypto Analyst Lark Davis, Bitcoin is about to record its ninth death cross in its short history. The “death cross” is considered a bearish indication, and it appears when the daily moving average (MA) 50 falls below the daily moving average (MA) 200.
According to the analyst, there have been eight death crossovers in BTC’s history, four of which marked the bottom and four of which preceded selloffs ranging from 30% to 65%.
#bitcoin is about to hit the dreaded “death cross”…but does it matter?
Well, there have been 8 death crosses in the history of BTC. 4 marked the bottom (approximately) and 4 came before the sales of 30, 60, 61 and 65%.
What does the cross of death number 9 have in store for us? pic.twitter.com/RHmE3ulEMp
— Lark Davis (@TheCryptoLark) January 13, 2022
That said, the technical indicator’s bear market prediction history is patchy, with a 50% success rate. Previous death crossovers, which occurred in 2014 and 2018, were followed by a sell-off in the days that followed.
However, the death crosses seen in June 2021, late March 2020 and October 2019 were, in contrast, bear traps or false signals signaling major price lows. The death cross in October 2019 triggered a 42% pump the previous day, while the consolidation following the death cross in June 2021 resulted in a new bull run.
Since moving average crossovers are based on historical data and therefore lagging indicators, they cannot be used as standalone indicators. By the time the crossover is confirmed, the market is frequently oversold and expected to rebound, as it did in June 2021 and late March 2020.
As previously reported by U.Today, Bitcoin hit highs of $44,342 on January 12 after new inflation statistics were released. The consumer price index rose 7% in the year to December, the highest since June 1982.
Analysts believes that Bitcoin’s next stop could be a retest of $46,000. At press time, Bitcoin is trading at $43,978, up 2.61% in the past 24 hours according to data from CoinMarketCap.
Bitcoin (BTC) price
Bitcoin (BTC) is rallying after briefly breaking through the $40,000 support for the first time since September 2021 on January 10, reaching lows at the $39,650 level. The rebound from $40,000 comes with a bullish Dragonfly Doji candlestick as strong support. Risks to this outlook remain, although the pair could turn borderline over the next few days.
The rise in price may continue to erase losses for the third day in a row. The outlook therefore appears to have turned neutral, endorsed by the moving average (50-MA) about to cross below the moving average (50-MA) to form a “death cross”. That said, a sustained break below $40,000 would be needed to confirm a continuation of a downtrend.
On the upside, the first hurdle for the bulls could be the $45,000 area. If they overcome it, the next target would likely be the $48,000 zone, where another positive break could open the door for a test of the psychological zone at $50,000.