Bitcoin hits first daily death cross this year: Looking back to see ahead

While considered an ominous signal by traditional financial chartists, bitcoin’s own daily death cross often leads to mixed results

article-image

mapichai/Shutterstock modified by Blockworks

share

Bitcoin’s daily “death cross” has once again reared its ugly head, with both its long-term and short-term moving averages having crossed on Tuesday.

While considered an ominous signal by traditional financial chartists, timing exits of positions based on reading the tea leaves from bitcoin’s own death crosses often leads to mixed results.

In the realm of technical analysis, a “death cross” is a bearish signal that occurs when a shorter-term moving average crosses below a longer-term moving average. 

The most commonly observed averages for this indicator are the 50-day and 200-day. When the 50-day moving average crosses below the 200-day moving average, it signifies a potential long-term downtrend in the asset’s price. Or, so the thinking goes.

This is considered a warning sign for investors and traders, some of whom may interpret this crossover as a sell signal or a sign of impending bearish market conditions. 

It’s worth noting that, depending on who you ask, technical analysis can either be considered voodoo magic or an important part of one’s trading strategies. Blockworks reached out to several trading desks to get their take, and were either denied to offer comment or went unanswered.

Looking back to see ahead

Bitcoin (BTC) experienced one of the first such signals back in April 2014, immediately shedding some 17% of its value from $442 to $363 — though the bearish price action was short-lived. Shortly following its April sell-off, the asset rose 90% and topped out at $683 roughly 50 days later.

It wasn’t until September of that same year when a second death cross had formed that the asset entered into a prolonged bear market that lasted an entire year.

Roughly three and a half years later, the same signal occurred again following a 10% sell-off, from $7,932 on March 29 to just over $7,000. 

Traders looking immediately to the cross would have had to contend with a reversal in its downward trajectory after BTC rose more than 50% to just under $10,000, a month later.

Bitcoin eventually succumbed to further sell-side pressure in a subdued market that persisted right until April 2019 when it was cut short by news of Meta’s stablecoin ambitions.

Other notable examples include March 2020 and June 2021, which more or less proved to be false signals as in both cases sell-side pressure was also short-lived.

Instead, it would appear that more often than not, it’s usually the death cross that precedes a short-lived bear market that tends to offer any valuable alpha, according to some

All of this is not to say that the death cross does not provide at least some valuable tell, though it’s an important reminder that this year’s death cross, as in 2022, should be measured against macroeconomic fundamentals and market sentiment.

Oh, and don’t forget about all-important on-chain metrics.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the On the Margin newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2024

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Unlocked by Template.png

Research

With the spot ETH ETF approval, the institutions are coming. stETH - given its dominance in marketshare, existing liquid market structures, and highly desirable properties - is poised for institutions.

article-image

Trump insiders say he will dismantle the anti-crypto army within an hour of taking office, but the campaign has been quiet about how it plans to do so

article-image

Plus, Solana set a record for weekly unique active addresses on the network last week

article-image

Launching cryptocurrencies the old fashioned way may soon make a return

article-image

Kraken and CertiK brought their beef to social media after Kraken said researchers exploited $3 million through a bug

article-image

NVIDIA’s historic run is only deepening the divide between mega-cap tech stocks and the rest of the market.