Bitcoin death cross is back – price threatens drop to $51,000
- Bitcoin exploded above $61,000 during the weekend session, hitting a new record high.
- However, the cryptocurrency could not sustain the upward momentum as profit-taking intensified.
- BTC is now trading about 9 percent lower from its peak and has hinted at further downside after forming a death cross.
- The cost of buying a bitcoin rose more than 43 percent after hitting a low of $43,000 in February.
On Saturday, the flagship cryptocurrency established a new milestone high at $61,788 – in anticipation that Joe Biden’s $1.9 trillion stimulus package, including direct payments of up to $1,400, would prompt retail investors to buy bitcoin with the proceeds.
But despite the encouraging Bitcoin Pro catalyst behind it, the cryptocurrency market still corrected lower.
Traders loosened their exposure to the bitcoin market ahead of the Federal Reserve’s two-day meeting that ends on Wednesday – a high-impact event. Federal Reserve officials could debate whether or not to intervene as yields on longer-dated US Treasurys rise.
A policy of non-intervention could send bitcoin prices lower as rising yields make holding/buying the US dollar more attractive.
So it seems traders were expecting the move before the session ended. Bitcoin fell nearly 9 percent after setting a record high. Still, the cryptocurrency avoided a steeper sell-off in the hope that beneficiaries of the stimulus would raise their bids for the BTC/USD exchange rate.
The infamous death cross
Amidst the ongoing intraday swing between gains and losses, Bitcoin formed a death cross.
In retrospect, „death crosses“ appear when an asset’s short-term moving average slips below its long-term moving average. This week, Bitcoin’s 20-4H exponential moving average closed below its 50-4H simple moving average.
The said 20-50 crossover historically serves as a predictive sell-off indicator, which increases the risk of further declines in the Bitcoin market.
The BTC/USD exchange rate slid 2.5 percent after forming the death cross. In line with its earlier reactions to the bearish crossover, the pair risked a further decline towards its next downside target at the 20-4H moving average (the orange wave in the chart above). This is near $51,000.
Meanwhile, a rising trendline supported Bitcoin’s bullish bias. A bounce off the price floor could lead traders to increase their bids for the horizontal resistance above – at around $58,000.
An extended move higher would see Bitcoin regain its previous record high.
„Bitcoin is still in an uptrend on the daily chart,“ explains Josh Rager, co-founder of Blockroots.com. „Trend lines are meant to be broken. But as long as [the] price is above $50k (above the previous range), I think it will continue to rise to new highs. People will shout ‚the peak‘ on every pullback, so get used to it.“