Impending "cross of death" BTC-Trap for sellers

Bitcoin may be close to the end of a bear market-a popular indicator predicts a reversal for the first time since March 2018. We consider the retrospective of the "cross of death" and its role in the current market.

Bitcoin is aiming to pass the so-called "death cross" - the 50-day moving average is falling fast and could fall below the 200-day moving average within the next week or so. If confirmed, the event on the chart will be the first such intersection of these averages since March last year.

The death cross is a long-term bear market indicator, according to the theory of technical analysis. In reality, however, it is a lagging indicator that often leads to sellers getting trapped on the wrong side of the market, as shown in the charts below.

The 50-day moving average fell below the 200-day moving average on March 31, 2018 (top left), after which sales stalled at around $ 6 '500 and the cryptocurrency climbed to a high of around $ 10' 000 in the first week of may.

Note that the relative strength index (RSI) was reporting oversold conditions when the crossing occurred. The market is often oversold by the time the crossing is confirmed, as the MA is based on past data and the crossings are the product of price rallies or sell-offs.

In mid-September 2015, bitcoin's rollback from highs of around $ 250 also fizzled out to around $ 220 with confirmation of the death cross.

In the following weeks, the cryptocurrency remained in the range of 220-250 dollars, after which at the end of October 2015 it entered the bull market. This was followed by a rapid rise to a record high of $ 20,000 by December 2017.

The coming cross could also prove to be a bear trap, as by then bitcoin is likely to be oversold, falling more than 40% from a June high of $ 13 ' 800.

In addition, the cryptocurrency is due to receive a mining reward of half in may 2020 and could repeat history by taking a strong bet six months before the event, as noted by popular analyst 100trillionUSD.

Still, the ongoing pullback from recent highs above $8 ' 800 seems to have its bearings, according to technical charts. Thus, bitcoin is likely to remain on the defensive in the days leading up to the crossover and rising below recent lows of around $7'750.

The spread between the 50-and 200-day moving averages is currently at $417 - the narrowest since early may - and indicates that bullish sentiment is the weakest in five months.

Daily, 6-hour and weekly schedule

Bitcoin bounced off the 100-week moving average last week and witnessed a double breakdown on the 6-hour chart (lower left).

Despite this, the cryptocurrency failed to pull out the 200-day moving average on October 11 (top right) and fell to below $ 8 '000, forming a bearish pattern of a higher high above $ 8' 800.

Simply put, bearish sentiment is still quite strong, and a deeper decline below the 100-week moving average at $ 7 '755, possibly in support of a level near $ 7'430 (multiple daily lows in early June) could be in the run-up to confirmation of a death threat.

The Outlook will become bullish if and when prices rise above $ 8 ' 820, which would invalidate the bearish scenario to lower highs.


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