Crypto

What is the cross of death and how does it affect the price of bitcoin Geeko

The death cross usually marks the end of the bull run.

The “cross of death” or “cross of death”, which all traders dread, appears when the 50-day moving average line crosses the 200-day line. It is traditionally equated with an indicator that signals traders about the end of a bullish period.

A moving average is a price trend indicator over a period and is mainly used to identify trends in trading and, in particular, to confirm areas of support and resistance for prices. The indicator is not an indicator of the current price of a currency or a cryptocurrency – it is a so-called “lagged” indicator that allows you to have a broader view of the market in which there are strong fluctuations.

Gold cross and cross of death

There are two types of cross. The “golden cross”, which usually indicates the beginning of a bull market (or bullish run), and the “cross of death”, which, conversely, indicates the beginning of a bear market.

While the effects of the Golden Cross and the Cross of Death are often correct in the short to medium term, they are not always reliable indicators. As cryptocurrency specialist Benjamin Cowen recently explained on his Youtube channel, during the accumulation period, several death crosses and golden crosses can appear on the charts, which will not lead to a bull or bear market.

Several Cross of Death and Golden Cross may appear during the accumulation period without triggering a bull or bear market.

“In my opinion, there are two types of the Cross of Death” – explains the creator of the channel “Into the Crypto Universe”. “One may appear in the accumulation phase. At this point, the price moves sideways and price volatility creates crossovers between the two moving average lines. Another – after a strong rise in prices. ” This second scenario is traditionally feared because it is usually followed by a period of decline of several months – a bear market. However, it is not uncommon for the “cross of death” to be followed by a jump before prices collapse. “The golden cross and the cross of death tend to emotionally affect investors. “

“In 2018, the death cross confirmed the bear market.– explains another well-known analyst at Rekt Capital. Over the next 6 months, Bitcoin’s value plummeted from $ 8,500 to $ 3,100, more than 50%. However, before the appearance of this indicator, the price of bitcoin had already dropped by more than 50%. For this reason, we are talking about a “lagging indicator”. The golden cross also does not appear immediately after the accident. This confirms the trend after several weeks of growth. In 2019, it emerged in June, when the bitcoin price had already dropped from an all-time low of $ 3,100 to just over $ 4,300. However, the indicator is mostly reliable as people who bought bitcoin when it first appeared could potentially triple their share within two months.

The “cross of death” may appear in a few weeks.

Bear market or accumulation period?

Bitcoin’s price is very difficult to predict due to its volatility. However, the recent fall in prices seems to be slowly leading us to the death cross. “The likelihood that the two lines do not intersect is relatively small. The price of bitcoin must rise more than $ 1,200 a day to prevent this from happening. “ explains Benjamin Cohen.

While it is possible that the Cross of Death is difficult to avoid, the statistics currently support a bear market or a period of accumulation. These two cases are very different. A bear market can lead to a sharp drop in prices for several months. The accumulation period is characterized by smaller price fluctuations (of the order of 10–30%) over a period that can last from several months to a year, and, as a rule, leads to a further “bullish” period.

Back to top button