Bitcoin’s price has taken a beating in 2018, and many experts believe there is more of a downside to come.
Crypto trading experts like Crypto Investor is of the opinion that cryptocurrencies are still in bubble territory:
Bitcoin has been in an obvious downward channel since the end of December 2017. It attempted to break out of this channel on 7 January and 5 March without any success.
What Is a Death Cross?
A Death Cross occurs when a 50-day moving average crosses below the 200-day moving average, as might soon happen in the graph below where the orange line is headed for a cross below the purple.
A moving average is the value of the instrument over the last x days, for example if the 50-day moving average is at $9707 today, then that is bitcoin’s average value over the last 50 days. If an instrument’s price is on the rise, the moving average will move higher. Also, in the case of a rising price, the shorter moving average (like 50) will rise faster than the slower (like the 200-day for example).
What Is the Significance of a Death Cross?
Traders all around the globe connect great significance to the formation of a death cross. It usually signals the start of a bear trend or confirms that such a trend is already in progress. Many of the larger players in the market will then sell their positions, usually exacerbating the decline in price that was already happening.
What Would Prevent a Death Cross?
The 50-day average needs to move up to prevent a cross.
For example, if the current price of bitcoin today is $7980, and the 50 moving average is sitting at $9654, then the price needs to start spending time at a value of greater than $9654; otherwise, the current price will drag the moving average down.
Bitcoin Is on the Verge of Falling Further
Not only is the Death Cross looming, but a rising support line (refer to the red line below) that has been in place since October 2017 is in danger of being breached. If this support line is crossed, it could easily turn into resistance when the bitcoin price eventually rises again.
Fundamental or Technical Correction?
It is my suspicion that fundamentals might not play such a large role in the current price action of bitcoin. The cryptocurrency has climbed hard since September 2017 and a technical pullback is to be expected. The “whales” (the big players that hold the majority of bitcoin) might also be manipulating the price for some nefarious reasons.
Should I Buy Bitcoin at Current Levels?
The question is whether we have reached the bottom or if there are further downside. If you look at the volume bars at the bottom of the graph above, it looks like volume is increasing when the price drops. This shows that in the eternal battle between buyers and sellers, the sellers look to be stronger at present.
Warning: I do not give financial advice in this article. Gain proper external advice before investing in cryptocurrencies as it is a high risk asset class.