Today’s bitcoin chart generated one of the most bearish signals in traditional technical analysis: the death cross. does it represent a valid argument for the beginning of a long-term bear market? what has been its historical effectiveness during the almost 12 years of bitcoin trading? Can the cross of death lead to the upside?
Today’s beincrypto review answers all these questions. We look at the 8 instances of death crosses in BTC history to understand how much today’s event could affect the cryptocurrency market in the near future. the conclusions can be surprising!
Reading: Bitcoin death cross history
what is a death cross?
A death cross is a pattern in classic technical analysis in which the short-term relative moving average crosses below the long-term relative moving average (ma). its opposite is the golden cross. the former is a confirmation of a downtrend, while the latter indicates an uptrend.
Traditionally, the death cross and the golden cross are supposed to occur between 50 ma and 200 ma on the daily chart. These curves take into account a large amount of data, so their movement is more of an indication of a long-term trend than a reaction to current changes in an asset’s price.
Death cross, like most technical indicators, is a so-called lagging indicator. This means that it only confirms events that have already taken place in the market and possibly indicates a general trend. For this reason, its readings often generate false signals and should never be used without reference to other indicators.
death cross for bitcoin
Bitcoin is currently struggling to hold long-term support in the $40,000-$42,500 area. reached this range after a drop of approximately 40% from the all-time high of $69,000 on November 10, 2021.
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The sharp drop in the price of btc in the last 2 months has led to a drop in the 50ma, which today intersects with the 200ma. therefore, a classic bitcoin death cross is taking place today (red circle). Interestingly, the 200ma still has a positive slope as its reaction to the recent price drop lags.
On 15 September 2021, we witnessed a golden cross on the BTC chart (green circle). Its appearance was a consequence of the dynamic growth of Bitcoin prices after reaching the bottom at $29,500 on July 21, 2021. Measuring from this event to the ATH, the largest cryptocurrency gained 50%. This was despite initially falling 14% and recording a bottom at $39,500.
Historical performance: 2011-2018
In the nearly 12 years of bitcoin’s trading history, the death cross has occurred 8 times. let’s take a look at the price action that followed this signal each time to see if we should expect the start of a bear market. For a better illustration of price changes and trends, we use a logarithmic chart.
the first death cross occurred during the bitcoin genesis cycle on september 28, 2011. at the time, btc was falling after reaching a high of $31.90. since it crossed 50ma below 200ma, bitcoin has lost another 60%. It recorded a macro bottom of $2.01 on November 18, 2011. Thereafter, it never returned to that price.
Another 3 instances of death cross took place after the bull market of 2012-2013. The bearish signals occurred after Bitcoin established a peak at $1177 on November 30, 2013. Interestingly, with only one of these signals leading to sharp declines and reaching a bear market bottom. Further, instances of death cross have occurred:
- april 8, 2014, after which btc rose 52%,
- september 4, 2014, after which btc fell 66%,
- on September 13, 2015, after which btc rose 116%.
After another bull market of 2016-2017 and a historical ATH at $19,764 death cross happened on March 30, 2018. Immediately after this signal, Bitcoin rose by 42%. However, it eventually declined for the next 9 months, reaching a bottom at $3,148 on December 15, 2018. Measured from the intersection of the 50 MA below the 200 MA, this was a 55% decline.
Historical performance: 2019-2021
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The next 2 crossover death cases were in late 2019 and early 2020. Both signals were mixed and the price action that followed was not easily predictable. In March 2020, a black swan related to the covid-19 pandemic occurred, which made possible predictions even more difficult. death cross took place:
- on Oct 25, 2019, after which btc fell 25%,
- on Mar 25, 2020, after which btc rose 49%.
Finally, the most recent death cross – prior to the one taking place today – happened on June 19, 2021. At that time, Bitcoin was experiencing a deepened, 55% correction from its historical ATH of $64,840 on April 14, 2021.
the cross of death occurred a month before the fix was finished. immediately after, the price of btc fell another 18%, but eventually recovered and rose 49% before the next golden cross, which we wrote about in the previous section.
Historical analysis of bitcoin prices after the occurrence of the death cross yields mixed results. in 50% of cases, the indicator correctly signaled a downtrend and predicted further declines, on average 51.5%. on the other hand, in the remaining 50% of cases, it generated a false signal and further increases occurred, at 66.5% on average.
These results lead to several conclusions:
- the death cross on the bitcoin chart is not an unequivocal signal of the continuation of the downtrend and has a significantly lower effectiveness than in traditional markets.
- the thesis of the beginning of a bear market cannot be defended with reference to this indicator alone. should be juxtaposed with other signals.
- long-term, the btc market grows over time, so even bearish death cross readings historically lead to slightly larger gains than losses.
To see beincrypto’s latest bitcoin (btc) analysis, click here.
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