By Samuel Indyk
Investing.com – The price of Bitcoin jumped back above $34,000 on Wednesday morning but that does not necessarily mean things are looking rosy, with some technical indicators painting an ominous picture.
The death cross is a technical pattern whereby the 50 Day Moving Average and the 200 Day Moving Average converge and cross, with the 50DMA dropping below the 200DMA. It is seen by technical analysts as a signal for further potential selling pressure in an asset class.
With Bitcoin continuing to tread water below $40,000, the 50DMA has taken a downward trajectory and currently sits around $45,900. The 200DMA sits around $42,000 but the levels are continuing to converge.
The death cross typically signals that short-term momentum has slowed but it is not always a reliable indicator. The last time a death cross was formed in Bitcoin, in March last year, a deeper sell-off was not forthcoming and a golden cross was formed just two months later. A golden cross is the inverse, when the 200DMA drops back below the 50DMA.
“A death cross could be an indication that prices may remain subdued for a while to come,” said Quantum Economics founder Mati Greenspan.
However, for now, the psychological $30,000 level looks a key level of support. Some have warned that any firm break below that level could be the catalyst for the next sell off, while if that level holds, $40,000 appears to be the key level to the upside.
“I continue to believe that a material break of $30,000 will trigger another capitulation trade, which may trigger cash-raising selling in other asset classes,” OANDA Senior Markets Analyst Jeffrey Halley said in an emailed note.
At 10:41BST, Bitcoin trades around $34,300, up around 4.5% in the last 24 hours.
Technical View: Bitcoin death cross on the horizon
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