Things could soon go from bad to worse for bitcoin (BTC) traders looking for bullish cues on technical charts.
The cryptocurrency's 50-week simple moving average (SMA) is falling fast and looks set to cross below the 200-week SMA for the first time on record.
According to technical analysis theory, the bearish intersection of the two averages often referred to as the death cross, means the market is about to head into a tailspin.
Bitcoin has dropped 75% since reaching a record high of $69,000 in November last year. The bear market has proved to be more intense than the previous ones during which sellers failed to establish a foothold under the 200-day SMA.
Critics of technical analysis would point out that the death cross, irrespective of whether it occurs on the daily or weekly charts, is a lagging indicator and unreliable. That's largely true, as the indicator is based on backward-looking moving averages and reflects the asset's past performance.
Bitcoin's weekly chart shows an impending death cross, the first in the cryptocurrency's 13 year history. (TradingView) (TradingView/CoinDesk)
Critics of technical analysis would point out that the death cross, irrespective of whether it occurs on the daily or weekly charts, is a lagging indicator and unreliable. That's largely true, as the indicator is based on backward-looking moving averages and reflects the asset's past performance.
The death cross has a bad reputation for trapping sellers on the wrong side of the market in traditional finance. And it has done so to bitcoin traders in the past. For instance, the daily chart death cross of March 2020 marked a major price bottom.
Seasoned traders, therefore, read the death cross in conjunction with other chart factors and fundamental indicators, which are split on the next possible move in bitcoin.
Per Delphi Digital, bitcoin's sideways trading in the range of $16,500 to $17,300 in the aftermath of FTX's collapse offers little hope to the bulls.
"We still believe this area does not have much structural support, and in the face of further contagion and uncertainty, we remain cautious as we watch the $9k-13k level," Delphi's strategists, led by Andrew Krohn, wrote in a note to clients.
Several miners or those responsible for minting coins are likely to go bankrupt in the first half of next year, pushing bitcoin to $12,000 and below. Add to that the Federal Reserve's persistent anti-stimulus bias and the path of least resistance appear to be on the downside.
That said, in the past, bitcoin has bottomed out to begin a new rally 15 months ahead of the mining reward halving, a programmed 50% reduction in the pace of supply expansion every four years.
The next bitcoin halving is due in March/April 2024. If history is a guide, the bitcoin bear market may have ended in November at $15,473 and the cryptocurrency could rally as high as $63,000 ahead of the halving.
All writers’ opinions are their own and do not constitute financial advice in any way whatsoever. Nothing published by CoinDesk constitutes an investment recommendation, nor should any data or Content published by CoinDesk be relied upon for any investment activities. CoinDesk strongly recommends that you perform your own independent research and/or speak with a qualified investment professional before making any financial decisions.
Recommended Content
Editors’ Picks
Bitcoin Weekly Forecast: Further upside likely after hitting new all-time high
Bitcoin (BTC) surged more than 10% this week, hitting a new high of $76,849 on Thursday, buoyed by the crypto-friendly candidate Donald Trump’s victory in the US presidential election.
Cardano breaks above descending trendline, eyes April high as bullish momentum builds
Cardano extends gains on Friday, following a close above a descending trendline the previous day. Technical indicators and on-chain data show bullish momentum, suggesting a rally ahead.
Top 3 Price Prediction: BTC touches new all-time high near $77,000 following Fed rate cut
Bitcoin price rallied and reached a new all-time high of $76,849 following the US Federal Reserve’s 25 basis point rate cut. Ethereum and Ripple followed suit and closed above their key resistance levels, hinting at a possible rally ahead.
Bitcoin, crypto market remain in uptrend following 25 bps Fed rate cut
Fed Chair Jerome Powell stated that the FOMC lowered the Fed funds rate by 25 basis points. The rate cut comes after Bitcoin reached a new all-time high price upon Donald Trump's election victory.
Bitcoin: New all-time high at $78,900 looks feasible
Bitcoin price declines over 2% this week, but the bounce from a key technical level on the weekly chart signals chances of hitting a new all-time high in the short term. US spot Bitcoin ETFs posted $596 million in inflows until Thursday despite the increased profit-taking activity.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.