Bitcoin’s Death Cross Could Be a Contrarian Buy Signal

3 months ago 28
  • The Bitcoin death cross could form as soon as June 19
  • Analysts are divided over whether the worst is to come or has already passed
  • However, a death cross is a lagging pattern that mostly shows what has passed

Bitcoin’s looming death cross has the crypto community shook and waiting for what many believe is impending doom.

Over the last few weeks, the top crypto has fallen from an all-time high of $64,900 to as low as $31,681.56. The downward spiral has led to a rise in negative investor sentiment. This sentiment is also reflected in Bitcoin’s Fear and Greed Index which fell to 13.

However, some analysts believe the worst has passed and yet others are predicting that the worst is yet to come. Which should we believe, and is it a good time to sell or buy?

In particular, several analysts, including a team from JP Morgan, are calling the looming death cross a bearish signal. In which case, the death cross could lead the crypto market to fall even lower.

What is a Death Cross

A death cross is a point of convergence between a faster period moving average, for example, the 50-day simple moving average, and the longer-term moving average, eg the 200-day simple moving average (SMA). The convergence is bearish as it shows that the upward trend has reversed.

Historical data, however, shows that previous crypto death crosses occurred late in the bear market. To clarify, the cross formed after the market had bottomed. In which case, bearish bets might be profitable for short-term traders but might not work for their long-term counterparts.

According to crypto analyst Sheldon Evans, in the past Bitcoin price pumped immediately after the death cross. However, the pump was brief, leading to a dip. Meaning for the more risk-tolerant investor this could be an opportunity to swing the market. Lastly, it is critical to remember that the death cross is a lagging pattern that shows mostly what has already occurred. As such, the worst might already be upon us even though the death cross hasn’t formed as yet.

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