Bitcoin formed a trading pattern on Jan. 8 that is being closely watched by analysts to predict the next decline.

In particular, the 50-day exponential moving average fell below the 200-day EMA and formed a “death cross”. This pattern came about when Bitcoin was going through a tough period in the past two months, trading more than 40% below its all-time high (ATH) of $ 69,000 on November 10th.

BTC / USD daily frame price chart | Source: TradingView

Death Cross in History

For the past two years, the Death Cross has had no significant impact on Bitcoin. In March 2020 in particular, the Death Cross came late after the BTC price fell from nearly $ 9.00 to below $ 4,000.

Additionally, its emergence prevented BTC  from rising to $ 29,000 by the end of 2020, as shown in the graph below.

BTC / USD daily frame price chart Death Cross appeared in March 2020 | Source: TradingView

Likewise, a death cross that appeared on Bitcoin’s daily chart in July 2021 – as in March 2020 – came later and was harder to predict, but did not result in a massive sell-off. Instead, BTC price only moved sideways before rising to $ 69,000 in November 2021.

BTC / USD daily frame price chart Death Cross appeared in July 2021 | Source: TradingView

But the bearish transition in both cases, as mentioned above, brings good news that will help limit its impact on the Bitcoin market.

The Bitcoin price rally in July 2021 came mainly after rumors that Amazon would accept BTC as payment – although the rumor was later refuted – and during “The B-Word” conference. , Twitter CEO Jack Dorsey, Tesla CEO Elon Musk and Cathie Wood, CEO of ARK Invest, spoke out in favor of Bitcoin.

Similarly, Bitcoin rebounded sharply from below $ 4,000 in March 2020, largely due to the Fed’s announcement on monetary policy, specifically quantitative easing, to prevent the aftermath of the stock market crash caused by the Covid-19 pandemic .

Death Cross looks dangerous this time

Bitcoin’s recent decline reflects growing investor concerns about the Fed’s drastic decision to roll back its quantitative easing policy, including cutting its asset-buying program by $ 120 billion a month, followed by three rate hikes in the Year 2022.

Typically, rising interest rates make it less attractive to hold volatile assets like Bitcoin than government bonds, which offer guaranteed returns.

“This is evidence that Bitcoin is behaving like a risky asset,” said Noelle Acheson, head of market research at crypto lender Genesis Global Trading. He added that short-term owners will be the first to leave the market.

The combination of the entire decline in cash liquidity with a death cross formation could trigger further sell-offs in the Bitcoin market. However, if BTC price rebounds from the current support around $ 40,000, the 0.382 Fib line shown in the graph below will invalidate this bearish fall.

BTC / USD Daily Frame Price Chart with Fib Retracement Levels | Source: TradingView

In the event of a break below $ 40,000, BTC price will slide towards the nearest Fib support line near $ 35,000.

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