Bitcoin is on the verge of painting a Death Cross.
The technical chart pattern–which forms after an asset’s short-term moving average closes below its long-term moving average–holds credibility for predicting bearish markets. In the stock market crash of 2008, for instance, many investors credited Death Cross for limiting their losses.
The same scenario is now brewing on the Bitcoin daily chart, wherein the cryptocurrency’s 50-day moving average (50-DMA) is itching to drop below its 100-day moving average (100-DMA). If the crossover takes place, then it could leave Bitcoin under further bearish stress.
Analysts at EXCAVO, an automated market maker protocol, spotted the Bitcoin Death Cross first. They wrote in their TradingView analysis that the pattern is signaling “a environment in the period ahead.”
As of this Wednesday, the total distance between the 50DMA and 100DMA is less than $200. Meanwhile, growing downside pressure on Bitcoin from unfavorable macro fundamentals prompts the cryptocurrency to form a 50-100 crossover – at least ahead of November 2020.
That Trump Tweet
US President Donald Trump ended the ongoing bipartisan coronavirus stimulus talks on Tuesday, an abrupt move that jolted Wall Street, commodity, as well as the Bitcoin market.
“I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill,” he tweeted.
The tweet appeared to have ended all the hopes of seeing more federal aid to American households and businesses ahead of the US presidential election on November 3.
The lack of aid equals a lesser US dollar liquidity. Traders fear that a reduced supply of the greenback would make it more vital in the near-term. As a result, assets that trade against its value would plunge lower. That includes Bitcoin, which now has a record high inverse correlation with the dollar.
That said, if Bitcoin keeps moving lower until the November 3 election, then its likelihood of forming a 50-100DMA Death Cross will also become higher.
A Lagging Bitcoin Indicator, Nevertheless
Bitcoin will not necessarily continue its downtrend after forming the Death Cross.
If one looks at the first chart above, a bearish crossover between 50-DMA and 100DMA lags the price move downwards. BTC/USD first drops lower and its moving averages confirm a Death Cross later. In some cases, the pair confirmed the pattern while it was trading upward (in May 2020).
Analysts believe that the White House would pass a stimulus bill, one way or another. That proves that Bitcoin is heading north in the long run, thanks to a confirmed injection of trillions of dollars into the US economy, coupled with ultralow interest rates and infinite bond-buying policy of the Federal Reserve.
“If [Trump] would accept any stimulus, it’s just postponing the inevitable: a heavy recession/depression as a bill for terrible decisions made historically,” said Michaël van de Poppe, an independent market analyst. “Bitcoin can have a short-term effect on that too, negatively. Long-term bullish.”
BTC/USD was trading near $10,600 at the time of this writing.