After one of the toughest patches ever for Bitcoin enthusiasts, the largest holders of the digital currency are facing an ominous technical price pattern with a the name suggests a lot of pain ahead.
Known as a death cross, this gauge shows whenever an asset’s average price over the past 50 days falls below its 200-day moving average, an indication of momentum. its going down. And while it hasn’t happened yet for Bitcoin, it looks like it will by the end of this week, according to Mati Greenspan, founder of Quantum Economics.
“The chart is pretty clear,” he said.
Bitcoin avoided a death cross for another day, rallying 2.6% to around $42,813 at 2:44 p.m. EST in New York. Before Tuesday, it was up just three days since the new year began. Ether, the second-largest digital token by market value, also looks to be on the verge of forming a death cross, though it also traded higher to around $3,233 on Tuesday.
But when it comes to the cross, “history is really mixed – it’s no surprise that some of the macro context is influencing price action, but we’ve seen a healthy 24-hour bounce.” past,” Juthica Chou, head of OTC options trading at Kraken, said on Bloomberg’s “QuickTake Stock” broadcast. “And I think the fundamentals are still really strong.”
Ahead of Tuesday’s compensation, the cryptocurrency has been under pressure in recent weeks, with Bitcoin down more than 30% since hitting a high of nearly $69,000 in November. The latest drop in financials The digital asset is happening as odds grow that policymakers could begin a series of rate hikes as soon as March – and that’s just one of the steps they’re set to take. to remove liquidity. In such an environment, speculative investments lose their luster. Currently, only 5% of JPMorgan Chase & Co.’s customers. predicts Bitcoin reaching $100,000 by the end of 2022.
The indicator is said to be bearish but Bitcoin’s track record around the most decimate formation remains murky. It marked a bad-sounding pattern last June and another in March 2020 that proved no obstacle to the upside as it rallied higher and formed a golden cross (when the pattern is reversed) two months later. But a sign of death in November 2019 caused coin trading to drop a month later.
“Some say it is bearish, but for Bitcoin, almost all previous signs of death or golden cross have proven to be a good buying opportunity, along with any other indicator. nothing else for those who join before 2021,” Greenspan said.
“Though not all – bad news happens whenever a sign of death occurs in broad market indexes,” said Craig W. Johnson, chief market technician at Piper Sandler & Co. Bigger or not all – possibly a bigger risk for BTC than the price at the moment. ”
Meanwhile, the International Monetary Fund has issued its latest warning that the parallel between cryptocurrency price movements and the stock market could pose a risk to financial markets. The correlation between US stock indexes and Bitcoin has increased to 0.36 in 2020, up from 0.01 between 2017 and 2019, according to the multinational organization.
Analysts have long noted that Bitcoin — and thus other cryptocurrencies — tends to move in tandem with equities. Recently, that relationship has strengthened and was even shown on Tuesday, with both stocks and cryptos reversing early morning losses to trade higher in the afternoon. Both have been volatile lately amid signs that the Federal Reserve has relaxed its stimulus withdrawals at a faster rate than previously anticipated.
The 100-day correlation coefficient for Bitcoin and the S&P 500 is currently at 0.44. That was the highest reading since Q4 2020 and one of the highest in a decade. A factor of 1 means the contents are moving in a lock step, while subtracting -1 will show they are moving in opposite directions.
The growing connectivity between asset classes “allows for the transmission of shocks that could destabilize financial markets,” analysts said in a report Tuesday. Officials are particularly concerned as more and more emerging market economies adopt cryptocurrency as a legal tender, particularly as El Salvador accepted Bitcoin as a form of payment last year. .
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