Bitcoin “Death Cross” Phenomenon, Investors Asked to Remain Calm

The 'Death Cross' phenomenon on Bitcoin (Photo; Doc. Eloconomista)

JAKARTA - The crypto market is once again haunted by the threat of a “death cross,” a technical analysis pattern that often raises concerns among traders. In recent days, Bitcoin, the world’s largest crypto asset, has shown signs that its 50-day simple moving average (SMA) is about to fall below its 200-day SMA—a signal that is often considered a sign that the market will experience a decline.

However, despite its scary name, experts warn that a “death cross” does not always mean disaster for long-term investors. This pattern does often trigger panic among day traders or those who are new to the crypto market, but for those who are experienced, a “death cross” is considered more of an opportunity than a threat.

History has shown that after the appearance of a “death cross,” the price of Bitcoin often experiences a significant recovery. For example, in September 2023, Bitcoin experienced a “death cross” and bottomed below $25,000, only to surge 190% in the following six months, surpassing the $70,000 price mark.

Quoted from Decrypt, Matt Hougan, Chief Investment Officer of Bitwise said, “If you’re like most crypto investors, you’re probably experiencing a mix of emotions, from fear to despair. However, based on my experience of over six years managing money in crypto, this is an opportunity.”

The crypto market is notorious for its extreme volatility, with price spikes and drops occurring in a short period of time. Tom Lee, a crypto market specialist, added that missing Bitcoin’s 10 best days of the year could have cost them 25% of their losses compared to those who had held on to BTC.

However, it is important to note that the significance of the “death cross” can vary depending on the indicator used. While SMAs are often used as a reference, exponential moving averages (EMAs), which take more recent price movements into account, show a different picture. The two indicators are currently moving more parallel, suggesting that this decline may be more of a temporary reaction than a long-term bearish trend.

For investors holding leveraged positions or engaging in day trading, this pattern may be more relevant in determining closer support and resistance levels. However, for long-term investors, investment decisions should not be based on a single indicator, but rather on a more comprehensive evaluation using multiple data and timeframes.

Finally, while the “death cross” may be a wake-up call for some, panicking or making decisions based on fear is not a wise strategy. The crypto market may be in difficult times, but for those who can survive, the opportunity to make big profits in the future remains wide open.