Bitcoin is fast approaching a death cross which might occur if prices drop below $7,200. A death cross occurs when the short term 50 day moving average (MA) crosses the long term 200 day MA. As prices drop, the now 80 day’s loss creates a descending line that will intersect with the ascending 200 MA line. This is indicative of a bear’s market. The opposite occurs when prices are on the rise signaling a bullish market. The nearing death cross is an ominous sign that prices will fall even further possibly reaching below $6,000 to $2,400. However, historically, this has not been the case.
Bitcoin prices have dropped several times in the past creating bear periods lasting an average of 71 days. However, prices not only recovered but rallied much higher than it was before the drop. There were two ‘death cross’ incidents in 2014 and one in 2015, and in both times, prices recovered and almost doubled. The reason being that as prices drop, Bitcoin becomes oversold creating an opportune environment for buyers. However, fluctuating prices are usually caused by volatility and speculation. But today’s market faces additional factors such as regulation and price manipulation.
Despite historic patterns, Bitcoin prices may continue to drop because buyers are now weary of impending regulation, high profile scandals, futures contracts, and price manipulation. These factors can deter confidence and prevent the purchase rally that typically revitalizes the market during a bear period. But on an individual basis, the death cross will present a clear opportunity to invest in high value projects at or below ICO price. A death cross seems imminent as there is no sign of prices recovering in the near future. With continuing bad press and rising competition from Altcoins, Bitcoin’s prices will steadily decline. But there are strong positive signs as well.
The advances of blockchain technology continue to gain the attention of major companies and exchanges. And money continue to pour into new crypto related ventures. Bitcoin Lighting was released this month and may give Bitcoin a much needed boost. Also, the ‘whale’ investors may capitalize on the cheap prices and bring the prices up with massive orders. Taking historical analysis into consideration and the recent positive factors a clear sign emerges: the death cross serves as a signal for opportunity to not only recover but to profit from this bear period.