Does Bitcoin’s Weekly Death Cross Pattern Call for Caution?

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An ominous-sounding technical pattern has appeared on bitcoin’s (BTC) weekly price chart for the first time on record. Analysts, however, are split on what it means for cryptocurrency.

Bitcoin’s 50-week simple moving average has crossed under its 200-week SMA, confirming a “death cross,” a bearish indicator suggesting the short-term price pullback could become a more sustained downtrend.

Even though the moving average-based death cross represents what happened in the past, many consider it a forward-looking indicator.

“The death cross formed on the weekly time frame makes for a cautious view of the near-term outlook and keeps the potential for a return to the $18,000-$16,300,” Alex Kuptsikevich, a market analyst at FxPro, said in an email.

One could argue that the death cross has come at the right time for bears, considering the crisis at crypto-friendly Silvergate Bank and surging interest rate expectations across the advanced world.

Bitcoin fell nearly 5% last week as Silvergate said it was evaluating its ability to survive as a going concern. The leading cryptocurrency ran into offers around the 50-week SMA for the second straight week.

“Technically, the 50-week moving average continues to act as a valid resistance from which the selling intensifies,” Kuptsikevich said.

Some observers, however, don’t see the death cross as a reliable indicator, because it is based on backward-looking moving averages and lags prices and has proved to be a contrary indicator in stock markets.

“A death cross is a nonevent. A weekly death cross means the 50-week average dropped below the 200-week average. They are *lagging* indicators that definitionally occur after a rapid decline,” Timothy Peterson, investment manager at Cane Island Alternative Investments, tweeted last month.

According to Peterson, the death cross has been unreliable as a standalone indicator in traditional markets.

“For the S&P 500 going back nearly 100 years, there have been 9 such occurrences: 1938, 48, 58, 63 , 70, 74, 78, 2001, ’08.,” Peterson said. “Within 50 days, the average gain was 22% and the average loss was -9%. Within 200 days, the average gain was 46% and the average loss was -11%. Those are great risk/return odds.”

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