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According to Bloomberg, Bitcoin is on the verge of forming a death cross for the first time since March 2018.
This bearish pattern is formed when the 50 moving average (MA) of a certain asset drops below its 200 MA. It's a technical signal, which usually serves as a harbinger of further sell-off, which essentially happened last year. The top coin by market capitalization plunged to as low as $3,100 back in December after brutal crypto winter.
While it's tempting for the bears to assume that another crypto winter is coming, a looming bearish crossover could also result in a significant price increase. Coindesk's Omkar Godbole mentioned that it's a lagging indicator, which could set up a nice bear trap. Based on historical data, the top coin could find a new bottom once another death cross is confirmed.
Conversely, when the long-long term MA of a certain asset falls below its short-term MA, a golden cross is formed. However, this bullish chart pattern served as a bull trap this year.
On July 30, U.Today reported about Bitcoin forming its first golden cross since February 2016 when the top coin was changing hands at around $9,700. Despite a few fakeouts, Bitcoin never went to the proverbial moon and experienced a significant correction to the current level of $7,400, CoinStats data shows.
Will Bitcoin find a local bottom at the $7,400 price level? Share your take in the comments!
Vladislav Sopov