New Delhi: A sharp fall and a breach below the key support of $40,000 level, brought Bitcoin in close proximity to an ominous technical patter — death cross.
The formation of death cross indicates potential for a major sell-off. It appears on a chart when a token’s short-term moving average crosses below its long-term moving average.
The fear of death cross seemed imminent when Bitcoin prices dipped below $40,000 although thanks to market bulls, the numero uno crypto asset has managed to rebound to above $42,000 levels.
Shivan Thakral, CEO, BuyUCoin said Bitcoin is still in a downtrend as it trades below the resistance level of $45,000. “Bitcoin needs a bit more recovery as RSI is still below 50, indicating that it is in the oversold zone. If bulls try to make an upside move, then the price may soar to around $45,000 level although, in case of any misstep, prices can fall to $38,000-$36,000 zone,” he added.
Bitcoin prices recently came under pressure following a hawkish commentary from the US Federal Reserve, rising inflation and rate hike signals, thus hampering investor appetite for riskier assets.
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The largest cryptocurrency has dropped 42 per cent from its peak of $68,790 hit in November last year.
However, Quant researcher Benjamin Cowen said that levels of severe fear on the Crypto Fear & Greed Index have only happened four times since 2018.
Adding to this, the trade-desk of WazirX said positive reversals from these events have resulted in substantial gains, ranging from 17 per cent to 1,585 per cent in Bitcoin, historically.
“This means that the bull and bear market have an elastic effect; the more rigorously the market goes down, the more aggressively it comes back up, giving remarkable returns,” WazirX added.
Market experts advised against panic selling. Investors must not follow mob mentality as sometimes such events do give false signals, they added.
“The death cross events in March and June last year ultimately led to the fresh bull run. Investors shouldn’t panic and resist liquidating their holdings. At times, such events do give false signals,” said Sharat Chandra, VP- Research & Strategy, EarthID, a self-sovereign Identity Management Platform.
Although, he was quick to add that past death cross events in 2014 and 2018 seem to suggest that deeper drawdowns can come to haunt cryptocurrencies across the spectrum. “In case of death cross, altcoins won’t stay immune. Markets may see massive sell-offs followed by a continued bearish trend,” he further said.
Bitcoin prices may be disappointing spot traders this year but long-time market participants remain unaffected by the corrections. The latest data shows that Bitcoin (BTC) miners are hoarding more coins.
Miners have increased their BTC holdings considerably in the first two weeks of 2022.