To believe or not to believe in the Bitcoin Death Cross prophecy ?
Current support and resistance points of BTC’s price
Right now, Bitcoin is in a price wedge with its support at 34,000 $ and resistance in the 41,000$ range, the price is not able to break above $41,000. BTC’s price has refused to fall below 30,000$ since May 19, so we can assume that there is very strong support at 30,000$ for Bitcoin.
The resistance price range that I have talked about being at $41,000 also happens to be BTC’s 200 EMA, yup BTC has 200 EMA as its resistance point, which is worrying from a Technical Analysis point of view because there is a rule that to be long term bullish on a asset its price should find support at 200 EMA.
200 EMA is Exponential Moving Average that measures the 200 day average of price movement in an exponential weighted way, meaning, this Technical indicator measures the most recent data points of the happening price movements.
You can learn about it here - https://www.investopedia.com/terms/e/ema.asp
Trading decisions based solely on Technical Analysis can be misleading
Fortunately, technical analysis can not perfectly tell us how any asset can behave, because that depends on the trading behaviour of traders which we can not predict.
In fact, this time, it is thought that the price of BTC has been manipulated by whales(giant holders of BTC) and it’s made to stay below the 200 EMA, to make the investor community believe that it is bearish to be in Bitcoin, as most investors’ trading decisions are based on basic technical analysis.
There has been panic BTC selling recently, some of these sellers may have panicked and sold off when they saw that BTC failed to find support at the 200 EMA.
These days, it’s smart to trade by not just being led by technical indicators , we should also evaluate the fundamentals of the asset.
Image Source Bitcoin’s fundamentals can be evaluated analysing its data science models like Stock to Flow Ratio
In case of Bitcoin, its fundamentals is showcased in it’s data science models like Stock to Flow ratio which will indicate if Bitcoin is overvalued at the current period. Currently the Stock to flow ratio indicates that BTC is undervalued, you can check all this here - https://www.lookintobitcoin.com/ .
The technical analysis of BTC shows that a death cross is looming near
Right now, in technical analysis, it looks like the 50 EMA is going to cross and go below the 200 EMA. This means that the short term exponential moving average of BTC is going below its long term exponential moving average, which is generally considered bearish and this phenomenon is called the death cross.
Whenever a death cross happens, a significant decline in BTC prices takes place. Ouch, here it means that maybe if death cross happens then BTC price can go down to 20,000$ and from there it should take off.
However, now the death cross has not happened and may not happen, meaning BTC’s 500 EMA can touch the 200 EMA and bounce off it. It can happen that BTC starts to appreciate in value to 54,000$ and beyond by June 30th, avoiding death cross.
If this scenario comes to play, then BTC’s short term 50 EMA will stay above BTC’s 200 EMA, painting a bullish picture for BTC.
Now, let’s check two death cross case scenarios - one after the 2013 BTC ATHs and one after 2017 BTC ATHs.
Death cross of 26 August 2014
BTC reached an ATH of 1170$ on Dec 5th 2013, after which it experienced a price decline that brought BTC’s 50 EMA downwards closer to BTC’s 200 EMA.
As the downtrend of price continued, BTC’s 50 EMA finally crossed and went below BTC’s 200 EMA, which was a death cross point with BTC’s price somewhere at 522$.
After this death cross point, BTC's price declined till the price bottomed at 154$ which is a 74% decline from the death cross point.
Death cross of 3rd April 2018
BTC reached an ATH of $19,758 on Dec 17th, 2017. After this BTC prices were experiencing continuous decline that was bringing BTC’s 50 EMA closer to BTC’s 200 EMA, until death cross occured on April 03, 2018 , where BTC price was 7,595$ with BTC’s 50 EMA having crossed and gone below its 200 EMA. BTC’s price further fell 66% from the death cross point bottoming out at 3,153$ on Dec 15, 2019.
BTC’s price direction currently remains uncertain
So, will there be a death cross for BTC now?, that point is approaching nearer and nearer day by day. Right now, all though fundamentally BTC looks bullish, some technical indicators like BTC’s price being below 200 EMA and the death cross possibility signal a bearish trend. Therefore, BTC’s price may go anywhere, southwards or upwards, one can not be certain of its price direction now.
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