Bitcoin’s (BTC) price action looks to be approaching a “death cross,” but one crypto analyst believes it might not be “so deadly” based on historical patterns. Instead, it could be a bear trap before Bitcoin enters a “super bull rally,” looking at a theoretical BTC’s seven-year super cycle.
A death cross is a bearish signal that occurs when the 50-day simple moving average (SMA) of an asset’s market price falls below the 200-day SMA.
Currently, Bitcoin’s 50-day SMA is at $62,141 and falling, indicating a potential crossover with the 200-day SMA at $61,676.
BTC/USD daily chart. Source: TradingView
The looming crossover suggests that Bitcoin’s short-term momentum underperforms the long-term price impetus, which tends to spark heightened fear and impulsive reactions among investors.
From a historical perspective, the death cross has a poor record of accurately predicting future price trends. It often results in a “bear trap” – a reversal against a bearish move that may force traders to abandon their short positions in the face of rising losses.
To put this into perspective, Bitcoin analyst Timothy Peterson shared a historical chart showing BTC’s price performance one to two months following the occurrence of a “Death Cross.”
“#Bitcoin’s’ death cross’ is not so deadly,” Peterson said, explaining that this has happened eight times since 2015, with BTC price rallying 67% of the time, two months after the crossover.
“This has happened only 8 times since 2015. What happens next? 60 days later, Bitcoin was up 62% of the time. The median return was +18%.” BTC price performance 60 days after “Death Cross.” Source: Timothy Peterson
From the BTC/USD daily chart above, Bitcoin price confirmed a death cross on Sept. 12, 2023, triggering a major bear trap, with BTC bottoming out at $24,000 on the same day before embarking on an extended uptrend toward the new all-time high reached on March 14, 2024.
Therefore, it is important to note that the death cross could be unreliable as a stand-alone indicator.
At the time of publication, Bitcoin is trading at $55,056. Having failed to beat the…
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