Will this time be different? Bitcoin eyes drop to $35K as BTC price paints ‘death cross’

Bitcoin (BTC) formed a trading pattern on January 8 that is widely watched by traditional chartists for its ability to anticipate further losses.

In detail, the cryptocurrency’s 50-day EMA (50-Day EMA) fell below the 200-Day EMA (200-Day EMA), forming the so-called Death Cross. This pattern emerged when Bitcoin has had a tough ride in the past two months, dropping more than 40% from its all-time high of $69,000.

BTC/USD daily price chart. Source: TradingView

Throughout history death

Previous death crosses have been insignificant to Bitcoin over the past two years. For example, a bearish 50-200 day EMA cross appeared in March 2020 after BTC price dropped from around $9,000 to below $4,000, which turned out to be later than the prediction.

Additionally, its occurrence has done little to prevent Bitcoin from rising to around $29,000 by the end of 2020, as shown in the chart below.

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BTC/USD daily price chart showing the death cross for March 2020. Source: TradingView

Likewise, the death cross that appeared on Bitcoin daily charts in July 2021 – as in March 2020 – was more delayed and less predictable. Their occurrence did not lead to a large-scale sale. Instead, the price of BTC consolidated sideways before climbing to $69,000 by November 2021.

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BTC/USD daily price chart showing a death cross. Source: TradingView

But the bearish moving average crosses in both cases, as mentioned above, accompanied the good news, which may have limited its impact on the bitcoin market.

For example, the Bitcoin price recovery in July 2021 came largely on the heels of rumors that Amazon would start accepting cryptocurrencies for payments – which later turned out to be false – and after a conference dubbed “The B-Word”, which saw Twitter speak CEO Jack Dorsey, Tesla CEO Elon Musk, and Cathy Wood, CEO of ARK Invest, are vocal in favor of Bitcoin.

Similarly, Bitcoin has rebounded sharply from its levels below $4,000 in March 2020, primarily after the US Federal Reserve announced its loose monetary policies to contain the fallout from the stock market crash led by the coronavirus pandemic.

The death cross this time looks dangerous

The recent drop in Bitcoin reflected growing investor concern about the Federal Reserve’s decision to aggressively abandon its loose monetary policies – including a rollback of its $120 billion per month asset purchase program followed by three price hikes – in 2022.

Higher interest rates usually make owning volatile assets like bitcoin less attractive than government bonds, which provide guaranteed returns.

“This is evidence that bitcoin is acting as a risky asset,” Noel Acheson, head of market insights at crypto lender Genesis Global Trading, told the Wall Street Journal, adding that short-term holders of coins would be “closest to the exit.”

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As a result, the general drop in cash, along with the formation of a death cross, could lead to further selling in the bitcoin market. However, that is unless BTC price rebounds from the current support level around $40,000, the 0.382 Fibonacci line shown in the chart below.

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BTC/USD daily price chart showing Fibonacci retracement levels. Source: TradingView

However, a break below $40,000 could risk sending bitcoin price to the next Fibonacci support line near $35,000.

The opinions and opinions expressed here are solely those of the author and do not necessarily reflect the views of Every investment and trading move involves risks, you should do your own research when making a decision.