Bitcoin’s Death Cross Might Be A Bear Trap

Technically, a death cross is the point when a 50-day moving average cuts a 200-day moving average from above indicating a bearish crossover. In the case of bitcoins, the daily chart below indicates that the 50-day MA is close to cut the 200-day MA downwards.

Bitcoin’s Death Cross Might Be A Bear Trap

According to some strategists, the death cross will end up causing a big sell-off in BTC. The price of bitcoins might dip to as low as $2800, something we observed last year in September. But there is also a bright side. The death cross mostly occurs at the end of a big bearish dip, after which prices generally tend to rally up.

It is also worth considering that it takes great effort to push the 50-day MA down below the 200-day MA. It should be noted that during mid-December, when BTC prices were at its peak, the 50-day MA was still rising.  It was after February 6, 2018, when BTC prices hit a low of $6000, that the 50-day MA took a bearish bias. Since then, the 50-day MA has been slowly closing in on the 200-day MA and is soon to make the cross.

However, if we’re to take a look at historical data relevant to BTC, we can see that a death cross, most often than not leads to a bear trap, and doesn’t yield such a big sell-off as certain strategists are concerned about.

For example, in 2014, April 11, BTC prices bottomed to $340 as soon as the death cross was confirmed, but then swiftly climbed up to $680. Other serious death crosses took place during September 2014, January 2015, and September 2015, all of which failed to incite a rapid sell-off but instead led to a gradual increase in prices.

As of now, it is being expected that a dip below the $7240 mark will confirm the death cross, which might further cause the prices to drop to $6600 after which a steady climb is expected as seen during other death crosses. However, it should also be considered that if prices dip below the $6600, as well, then further sell-off can happen, and its chances can’t be ruled out.

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