Bitcoin’s Death Cross Is Here – Should You Panic Now?
Tip: Relax and enjoy the Bitcoin revolution.
This is it! Expected since the mid-May 2021 crash, the death cross has just occurred for Bitcoin on June 19, 2021. Such a name is enough to frighten beginner investors, and even make more seasoned investors tremble.
First of all, I think it might be a good idea to recall what a death cross is in the world of technical analysis.
The death cross is a technical chart pattern indicating the potential for a massive sell-off in the asset concerned. The death cross appears on a price chart when the short-term moving average of an asset falls below its long-term moving average.
In general, the most common moving averages used in this pattern are the 50 and 200-day moving averages.
A Bitcoin death cross has just occurred
If you look closely at the price trend of Bitcoin, you can see that a death cross has just occurred for Bitcoin:
The big question on everyone's mind now is whether this death cross will trigger the start of a Bear Market for the Bitcoin price. Many people want to know if it is time to panic.
I recently wrote an article explaining that the bottom for the Bitcoin price seemed to be close. For this to happen, it was necessary to hold the $36K to continue this pattern of higher lows. This $36K resistance was broken on June 19, 2021, and the price of Bitcoin is around $33.5K at the time of writing.
In my opinion, there is still no need to panic. The $30K level is still holding and it is this support that you should watch in the coming hours and days.
The short and medium-term effects of the past do not allow us to consider this pattern as a reliable predictor for the Bitcoin price
Coming back to the death cross, I think it is important to look at the reaction of the Bitcoin price during the 6 previous death crosses in the history of Bitcoin:
The previous illustration shows us that the reactions of the Bitcoin price at 30 days have been positive or negative. It is difficult to conclude, as some people do, that this death cross is a sign of an imminent Bear Market for the price of Bitcoin.
In March 2020, the previous death cross occurred after the liquidity crisis that sent the price of Bitcoin below $4K for a few hours. The strong rebound that was seen had a positive effect which turned that death cross into a lagging indicator.
In reality, for many people, the death cross is a lagging indicator that does not allow for reliable predictions of future Bitcoin price action.
Furthermore, it is interesting to observe that the average of the 7, 30, 90, and 180-day returns is positive for the Bitcoin price after the death crosses. So it seems to me that there is no need to panic and follow the advice of those who think that the beginning of the Bear Market is near.
If death crosses are numerous, the resulting Bear Markets are much rarer. It is therefore important for investors to keep this in mind. Finally, it has been observed for several weeks that Bitcoin's price movements on weekends are rather tricky. This is something to be wary of.
Rather than panic, you need to keep a long-term view of Bitcoin. This is always the key to taking full advantage of the Bitcoin revolution.
A death cross is here. No need to panic. Stay a Bitcoin HODLer
A death cross should rather be seen as a confirmation that the price has moved very fast in the short term compared to the long-term trend. Whether it is up or down.
The two things you should remember instead are the following after a death cross:
When the price of Bitcoin fell sharply afterward, it eventually went back up, only to rise again and end up above it.
When the price of Bitcoin rose, it never went back down to the level it was at the time of the death cross.
This means that it is in your best interest to stay calm and control your emotions. In the long run, the success of Bitcoin is inevitable. All the good news that has been coming out in recent weeks will bear fruit in the months to come. So be patient and don't panic.
The Bitcoin revolution continues to move forward. You can relax and enjoy your ride. Stay strong, stay a Bitcoin HODLer.
In Bitcoin We Trust
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