Bitcoin’s fall below $9,000 has the crypto currency staring at a feared death cross. This is the case if the final 50-day moving average is below its 200-day counterpart. As the name suggests, this is a downward trend.
The term is used to describe a crossover of the 50-day moving average and the longer-term 200-day moving average. More specifically, it’s used to illustrate when the 50-day moving average moves below the 200-day moving average — technicians often look at this pattern as a bearish sign of what’s to come.
This would be the first death cross since 2015 for Bitcoin. After the death cross, bitcoin rallied close to $500 by early November that year from around $230.
Certainly there are some opposing technical signals that suggest that this may not be such a paralyzing event. The moving 200-day average continues to rise and served as intraday support on Friday. Bitcoin also has higher lows, with the trough being higher in April than in February.
Some strategists are saying that the death cross could yield a big sell-off in BTC. However, such fears are likely overstated, as the crossover tends to work as a contrarian indicator – that is, they tend to occur at the end of a big bear move, with prices rallying soon after.
In fact, it could end up being a bear trap, at least in the short term as the death cross failed to yield a big sell-off in two out of the last three events, and the odds are high that it would end up being a bear trap for the third time.