Bitcoin‘s recent price activity has brought the BTC/USD pair dangerously close to a so-called “dead cross,” a technical event often seen as a harbinger of further declines. According to popular investor Benjamin Cowen, Bitcoin could avert this situation if it manages to turn $62,000 into a support level. On August 9, Cowen highlighted historical data to suggest that Bitcoin bulls might avoid a new downward spiral by accomplishing this feat.
What is a Dead Cross?
A dead cross occurs when the 50-day simple moving average (SMA) falls below the 200-day SMA. Currently, data from TradingView indicates that the 50-day and 200-day SMAs are at 61,998 and 91,882, respectively. This crossover is traditionally viewed as a signal for further price drops. However, Cowen noted that past dead crosses have yielded mixed results. For instance, in 2023, Bitcoin’s price ascended immediately after a dead cross and surpassed the 50-day SMA, using it as support for further gains.
Historical Outcomes and Future Predictions
Contrary to the 2023 scenario, brief interactions with the dead cross in 2019, 2021, and 2022 led to expected declines. Cowen emphasized the importance of Bitcoin maintaining its position above the 50-day SMA of $62,000 to hold any upward momentum. Failure to do so might trigger another downward trend, pending significant changes in macroeconomic conditions, particularly adjustments in interest rates by the US Federal Reserve.
Key Observations
The BTC/USD pair showed signs of recovery, reaching $62,775 at the previous daily close but consolidating at slightly lower levels thereafter. Market experts pointed out that despite the price rise, open interest in the futures market did not recover, indicating that the recent rally might be driven by short positions closing. Analyst Julio Moreno from CryptoQuant corroborated this by saying the Bitcoin rally was largely fueled by short covering in the futures market. Another expert, Axel Adler Jr, identified the $62,000 price point as critical resistance, with major support below this week’s six-month low of $50,000.
Actionable Insights
- Monitor Bitcoin’s position relative to the 50-day SMA; holding above $62,000 is crucial for upward momentum.
- Watch for changes in macroeconomic conditions, particularly interest rate adjustments by the US Federal Reserve.
- Note the lack of recovery in futures market open interest as it could indicate the rally’s transient nature.
- Identify significant resistance and support levels, specifically $62,000 and $50,000, to make informed trading decisions.
By staying vigilant about these indicators, investors can better navigate the potential risks and opportunities in Bitcoin’s price movements.
