The threat of a “death cross” could signal the Bitcoin bear market

The “Death Cross”, a bearish technical signal looming on the price charts, could indicate trouble for Bitcoin (BTC) amid regulatory crackdowns and environmental concerns.

A death cross occurs when the 50-day moving average falls below the 200-day moving average. In this case, Bitcoin could enter a bear market area similar to 2018.

Previous death crosses resulted in further price drops of 70% in 2018 and 47% in 2019. The 2020 Death Cross came shortly after the March market crash caused by the coronavirus pandemic, which at the time proved to be a delayed signal.

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“Speculative reports suggest that Bitcoin could soon drop to $ 20,000, which points to the emerging bearish cross of the daily moving averages of 50 and 200,” Stephen Kelso, head of markets at brokerage firm ITI Capital, wrote in an e- Mail to CoinDesk.

Bitcoin appears oversold on the daily chart and is up about 13% in the past 24 hours, the biggest gain in two weeks. Wednesday’s price surge came despite a string of negative headlines from China, including raids against money laundering and mining closures.

The looming death cross could limit upward movements. Resistance is seen at around $ 40,000 which has limited short-term price hike over the past week. Although the May sell-off is stabilizing, the longer-term technical outlook appears less optimistic.

For now, buyers are defending short-term support above $ 30,000. A recovery rally is typical when the price falls below the 50-day moving average. Thereafter, a series of lower highs typically confirms a shift from a bullish to a bearish trend.

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