An ominous “Death Cross” is maturing on the Bitcoin price chart, which soon predicts a bleak outlook for the cryptocurrency.
The benchmark cryptocurrency has tumbled aggressively after forming a record high near $ 41,986 (Coinbase data) on Friday. At its recent low, it traded at $ 30,100 but managed to spark hopes of a bullish revival as traders bought the level and prices pushed above USD 35,000 from this Tuesday.
Nonetheless, the mixing between Bitcoin’s short- and long-term moving averages on a four-hour chart has raised the alarm about a possible bearish continuation.
The cryptocurrency’s 20-period EMA, seen as a tracker of short-term trends, dropped below the 50-period SMA, seen as an indicator of somewhat long-term price patterns. That led to the formation of the Death Cross, a pattern that traders see as a signal to increase their short position in the market.
Bitcoin forms the Death Cross pattern on the 4H chart. Source: BTCUSD on TradingView.com
The point where the two moving average waves converge in the above chart caused Bitcoin to expand its rebound move higher. That showed a strong technical confluence of two resistance levels, increasing BTC / USD’s potential to fall short when it attempted to close.
Part of the reason was a wobbly US dollar.
The dollar rebounded sharply from its two-year low in the past six days, bringing an inversely correlated Bitcoin lower. On Tuesday morning, the US dollar index cut a small portion of its gains, pushing BTC / USD higher. But as the US session approached, the trend showed signs of reversal and sell-off pressure resumed in the Bitcoin market.
US Dollar Index undergoes modest correction after testing its historical resistance range. Source: DXY on TradingView.com
Overall, a confluence of dollar and death cross MA resistances kept Bitcoin from expanding its retracement.
Deviant Bitcoin Bears
Investors nonetheless expected the dollar to resume its downward trend due to the prospect of additional stimulus from the incoming Joe Biden administration in the US. Increased dollar liquidity has seen Bitcoin soar from just $ 3,858 to a record high above $ 41,000 in just nine months of trading.
“This is a fake headline for Biden’s Covid / Stimulus plan,” said Jason A Williams, an independent market analyst and author.
HODL. Zoom out. Bitcoin is just on, ”he added.