- Bitcoin neared a death cross at press time, suggesting possible further declines.
- Historical trends showed that recovery was possible post-death cross, as seen in 2020 and 2021.
As a seasoned crypto investor with scars and battle wounds to show for it, I’ve learned that the cryptocurrency market is more akin to a roller coaster ride than a stroll in the park. The latest development – Bitcoin nearing a death cross – has me both cautious and intrigued.
Bitcoin [BTC] was trading at a price of $57,389 at press time.
Over the last 24 hours, this significant rise in BTC‘s value by 3.9% is more than just a daily jump; it also represents a strong recovery from the drop experienced on August 5th, where BTC’s price plummeted to as low as $49,781.
Despite a slow increase in Bitcoin’s value as we speak, it remains about 22.2% below its record peak of over $73,000 in March.
Death cross looms over Bitcoin
During this period, Bitcoin seemed to hover precariously near a technical setup called a “cross-over death,” or simply put, it was close to a situation where its short-term moving average crossed above its long-term one.
As a market analyst, I often encounter a situation known as a “Golden Cross Reversal.” In this scenario, my 50-day moving average dips beneath my 200-day moving average, which is historically viewed as a bearish signal by traders. This pattern can indicate potential downward trends in the market.
Based on statistics from Barchart, it appears that a pattern is arising where Bitcoin’s immediate profits are failing to surpass its extended profits.
In the past, Bitcoin has exhibited recurring trends, such as the appearance of a “death cross” in March 2020. Despite this, it went on to reach a record high later in the same year following the event.
Another instance was noted in June 2021, which also preceded a significant rally to record levels.
Even though this sign suggests a downtrend, considering past patterns, Bitcoin might be about to surge upward.
Building on the same thought, an influential cryptocurrency advocate, previously recognized as ‘wallstreetbets’ on Twitter, has pointed out an intriguing trend in Bitcoin’s price graph.
In 2020, Bitcoin followed a similar trend as what we’re observing now. Back then, Bitcoin was in a descending and broadening pattern during the COVID-19 pandemic, but plummeted below $5,000. However, it experienced a significant surge afterward, reaching over $20,000.
According to Wallstreetbets’ analysis, the 2024 chart suggested a similar trend.
In simpler terms, due to the current economic slump, Bitcoin appears to have created a widening downward trending pattern, suggesting it may have reached its lowest point. This setup could potentially lead to an upward jump similar to the one seen during the recovery period in 2020.
Fundamental outlook
Analyzing Bitcoin’s underlying factors can equally offer valuable predictions about where it might be heading in the future.
At the moment, the difference between Bitcoin’s market price and its true value, as indicated by its Market Value to Realized Value (MVRV) ratio, stands at approximately 1.79. This means that the current market price is slightly higher than the actual value derived from past transactions.
In simple terms, this ratio implies that Bitcoin might have been underpriced when it was written about, because a value less than 2 usually means the asset is selling below its true worth, potentially offering a good chance to buy.
Furthermore, the Outstanding Derivative Contracts (Futures and Options) for Bitcoin increased by 3.81% over the last 24 hours, amounting to a total of approximately $28.24 billion that remains unsettled.
Although there was an uptick, the Open Interest volume experienced a substantial drop of 48%, amounting to approximately $80.12 Billion as of the latest report.
Usually, this discrepancy means that although there are more active contracts, the total worth of trades is diminishing, which could signal a slowdown in market activity or a change in traders’ attitudes towards the market.
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2024-08-07 18:15