coindesk.com
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 (SMA) has crossed under the 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 timeframe 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, market analyst at FxPro, said in an email.
One could argue that the recently confirmed death cross has come at the right time for bears, considering the crisis at crypto-friendly bank Silvergate 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, do not see the death cross as a reliable indicator, and rightfully so, as it is based on backward-looking moving averages and lags prices. Besides, it has proved to be a contrary indicator in stock markets.
"A death cross is a non-event. 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," Peterson said.