12 Jun Here’s how Bitcoin’s impending death cross could be a contrarian buy signal
The above photo is a glimpse into the future of Bitcoin – its inevitable death cross . It is likely to be posted on social media and/or search engines as a cautionary tale of how much the price of Bitcoin will fall as a result.
The short answer is that it’s all about the death cross, where a currency’s price breaks down through the zero-line, and then falls back below zero. This can happen for many reasons, including the fact that investors are worried about their investments losing value—which is why they are selling their currency, causing the price to fall.
When looking at a chart of the currency, we generally see triangles formed by two horizontal lines. These are known as death crosses. These are used as contrarian buy signals because they are seen as a reversal point in the general trend of the market. Bitcoin is currently trading above the death cross at $5,814. But it has not always been this way. On August 9, 2013, Bitcoin was trading at $299.A series of sharp corrections in bitcoin (BTC) since an all-time high of $64,900 has led to negative sentiment among investors, at least in the short term. While some analysts believe the bottom may have been reached, others warn of further declines due to the death cross model, which is nearing completion at the time of writing. For novice traders, the name Death Cross carries a lot of negativity and a sense of impending doom. Such sentiment can cause panic selling, especially if the market was already in a downtrend before this pattern emerged. But should we fear the cross of death or is it a crystal ball telling traders that a fall is inevitable? Let’s find out by looking at a few examples.
What is the cross of death and how accurate is it?
A death crossover is formed when a shorter period moving average, usually the 50-day simple moving average, falls below a longer period moving average, usually the 200-day SMA. Daily chart LTC/USD. Source: TradingView The intersection is bearish because it shows that the uptrend has changed direction. Large institutional investors typically do not buy in a falling market until a bottom is confirmed. As a result, buying dries up and investors with positions rush to exit in panic, causing the price to fall even further. Before we look at some examples of the death cross in the crypto currency markets, let’s look at how this pattern has affected the S&P 500 Index from 1929 to 2019. According to Dorsey, Wright & Associates, LLC, the median decline after death cross is 12.57% and the average decline is much lower at 7.75%. However, looking only at the period after 1950, the average decline is less than 10.37% and the median 5.38%. While these numbers are not frightening, especially for crypto traders accustomed to volatility, the bearish convergence of these two moving averages should not be taken lightly. History shows that the death cross has in several cases led to huge declines in U.S. stock market indices. After the Cross of Death, the 19th. In June 1930, the S&P 500 Index fell 78.84% and reached its highest level on the 15th. September 1932 its lowest point. The next intersection of terrible death came with the correction of 53.44% that occurred between December 19. 2007 and December 17. 2007. June 2009. This shows how, in some cases, a death cross can predict a strong correction. However, two sharp declines of more than 50% in the 90-year history suggest that this model is not sufficiently reliable to cause operators immediate fear.
Bitcoin’s recent death crosses
Since cryptocurrencies are still an emerging market, the available data is limited. Let’s look at some examples of the death cross and how it has affected bitcoin. Daily chart BTC/USD. Source: TradingView The most recent death cross was on the 26th. March 2020, when the BTC/USD pair closed at $6,758.18. However, this death cross turned out to be an excellent counter sign to the purchase, as the couple had already married two weeks earlier, on March 13. had formed a bottom at $3,858. Earlier, the couple formed on the 26th. October 2019 a death cross when it closed at $9,259.78. At this point, the pair had already broken 33% from its high on the 26th. June 2019 corrected to $13,868.44. After the crossing, the pair arrived at the 18th. December 2019 reached its low at $6,430 and fell another 30%. From a high of $13,868.44 to a low of $6,430, the overall decline was approximately 53%. Daily chart BTC/USD. Source: TradingView In another scenario, bitcoin’s rapid bull market peaked on the 17th. December 2017 peaked at $19,891.99, with the formation of the death cross on the 30th. March 2018, when the pair closed at $6,848.01. By this time the pair had corrected by more than 65% from its all-time high at the time. Then the sale continued and they formed on the 15th. December 2018 bear market low at $3,128.89. This represents a further decline of about 54% from the death cross and an overall decline of 84% from the all-time high. The above examples show that the death cross occurs at the end of a bear market cycle, and investors who wait for this pattern to form return most of their profits to the market. At the same time, initiating bearish bets can work for short-term traders but be disastrous for long-term investors.
The examples show that the cross of death is a delayed pattern that forms when most of the fall has already taken place. In general : Long-term investors should not panic when they see a death cross on the daily charts, but it is a signal to be more cautious and perhaps prepare their portfolios to position themselves for various unexpected outcomes. Crosses of death can sometimes be used as countersignals. So when they are noticed, traders should look for other signs on the chart to identify a possible bottom. The views and opinions expressed herein are those of the author and do not necessarily reflect those of Cointelegraph.com. Every investment and every transaction involves risk. So you need to do your own research before making a decision.Bitcoin’s (BTC) impending death cross is a chart pattern that predicts the death of a currency. It is a bearish reversal pattern (a chart “signal”) that forms when BTC closes below the 50-day moving average (MA) and above the 200-day MA. When it does, it is a contrarian buy signal because cryptos normally only get stronger when the price is rising.. Read more about death cross trading and let us know what you think.
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