Bitcoin is currently witnessing a notable pattern on its chart. With the asset undergoing a bullish and bearish trend over the past month, Barchart, a financial market data provider, has revealed that BTC is facing an “Imminent Death Cross Formation.”
This formation comes against Bitcoin’s recent significant dip on Monday when the asset lost thousands in value, dropping to as low as $49,781.
Death Cross And The Implication For Bitcoin
A death cross is a technical chart pattern indicating the potential for a major sell-off. It appears on a chart when an asset’s short-term moving average exceeds its long-term moving average.
Typically, the most common averages used in this pattern are the 50-day and 200-day moving averages. In the context of Bitcoin, a death cross suggests that a significant downturn could be imminent, as it signals that short-term momentum is slowing relative to the long-term trend.
However, it’s worth noting that not every death cross results in a lasting bearish period. Bitcoin itself has shown resilience in the face of past death crosse formations.
For example, after the March 2020 death cross, Bitcoin rebounded and reached new highs later that year. Similarly, a death cross in June 2021 was followed by a strong recovery, culminating in a new peak months later.
These instances highlight that while a death cross can be a bearish indicator, it doesn’t necessarily dictate long-term price movements.
Market Performance And Short Term Outlook
Meanwhile, Bitcoin, after surging as high as $57,707 earlier today, has now retraced back to a trading price of $56,057., at the time of writing down by 0.8% in the past 24 hours.
This retracement has resulted in a more than $200 billion decrease in Bitcoin’s market cap valuation over the past day. Interestingly, despite this dip, the asset’s trading value has surged over the same period, increasing from $26.7 billion in the early hours of Wednesday to above $43.5 billion at the time of writing.
Sharing his technical outlook on the asset, prominent crypto analyst Ali has revealed that the Bitcoin chart shows a “classic rising wedge”—a pattern suggesting a correction to $54,500 should BTC break the $56,800 support.
Ali also highlighted that if the BTC price can close a candle above the $58,000 mark, the overall pattern can be considered “invalidated.”
This chart shows a classic rising wedge for #Bitcoin. A correction to $54,500 is likely if #BTC breaks the $56,800 support. However, if $BTC closes above $58,000, this pattern is invalidated! pic.twitter.com/p0Dd1fgoHk
— Ali (@ali_charts) August 7, 2024
Featured image created with DALL-E, Chart from TradingView