Will this time be different? Bitcoin's eyes drop to $ 35,000 as BTC price paints a 'cross of death'

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


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

In detail, the cryptocurrency’s 50-day exponential moving average (50-day EMA) has fallen below its 200-day exponential moving average (200-day EMA), forming what is known as a ” cross of death “. The pattern emerged as Bitcoin has taken a heavy toll over the previous two months, falling more than 40% from its all-time high of $ 69,000.

BTC / USD Daily Price Table. Source: TradingView

History of the cross of death

Previous death crosses were insignificant for Bitcoin over the past two years. For example, a bearish 50-200 day EMA cross in March 2020 appeared after the BTC price fell from almost $ 9,000 to less than $ 4,000proving to be later than predictive.

Moreover, its appearance did not prevent Bitcoin from reaching around $ 29,000 by the end of 2020, as shown in the graph below.

Daily BTC / USD price chart with the death cross for March 2020. Source: TradingView

Likewise, a death cross appeared on the daily Bitcoin charts in July 2021 which, like in March 2020, was later and less predictive. Its appearance did not lead to a massive sale. Instead, the price of BTC simply consolidated sideways before $ 69,000 rally by November 2021.

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

But the bearish moving average crossings in both cases, as mentioned above, accompanied good news, which may have limited their impact on the Bitcoin market.

For example, the Bitcoin price rally in July 2021 came mainly as a result of rumors that Amazon would start accepting cryptocurrencies for payments – which later turned out to be fake – and following a conference, nicknamed “The B wordwhich saw Twitter CEO Jack Dorsey, Tesla CEO Elon Musk and ARK Invest CEO Cathie Wood speak out in favor of Bitcoin.

Likewise, Bitcoin recovered sharply from its levels below $ 4,000 in March 2020, mainly after the US Federal Reserve announced its accommodative monetary policies to contain the consequences of the stock market crash caused by the coronavirus pandemic.

The cross of death this time looks dangerous

Latest Bitcoin Drop Reflects Growing Investor Concern Over Fed decision aggressively unwind its accommodative monetary policies, including withdrawing its $ 120 billion per month asset purchase program, followed by three rate hikes, in 2022.

Typically, rising interest rates make holding volatile assets like Bitcoin less attractive than government bonds, which offer guaranteed returns.

“This is proof that bitcoin acts as a risky asset,” Noelle Acheson, head of market analysis at crypto lender Genesis Global Trading, told the Wall Street Journaladding that the short-term holders would be the “closest to the exit”.

Related: Bitcoin Could Surpass September’s $ 30,000, Trader Warns

As a result, the overall reduction in cash liquidity coupled with the formation of death crosses could trigger further sales in the Bitcoin market. However, that is unless the price of BTC rebounds from its current support level of around $ 40,000, the 0.382 Fib line shown in the chart below.

Daily BTC / USD price chart showing Fib retracement levels. Source: TradingView

Nonetheless, a breakout below $ 40,000 may risk sending the price of Bitcoin to the next Fib line support near $ 35,000.

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