Bitcoin is set to form a so-called death cross, whereby its 50-day simple moving average drops below its 200-day SMA, which would be the first such instance since January 2022. A death cross points toward the short-term price momentum of an asset underperforming the long term.
The death cross pattern could form next week, Alex Kuptsikevich, the senior market analyst at FxPro, said on Monday. "Such a signal suggests a further decline, emphasizing the bearish trend here."
However, history suggests that a bitcoin death cross is not necessarily a reliable indicator in and of itself. BTC has seen nine previous instances in the past, of which only two were followed by negative returns over the next three-, six- and 12-month periods.
In this instance, however, bitcoin's death cross looks set to coincide with the dollar index (which tracks USD against major world currencies) doing the opposite. A golden cross is widely seen as an indicator of the start of a bull run. Bitcoin, like other risk assets, is usually inversely correlated with the dollar index. The index has risen 5.3% to 104.90 since mid-July, according to charting platform TradingView, while BTC declined 19% in the same period.
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