What is a Death Cross and why is everyone freaking out?

Posted by Taras Lanchev on

The price of Bitcoin is falling and this can only mean one thing - FUD. During these difficult times of Fear, Uncertainty and Doubt, Bitcoin investors turn to the only oracle out there who can calm their worst fears - the chart analyst.

Will Bitcoin rise or will it fall?

There is a huge industry of "TA specialists" also known as gurus, mentors, masterminds or oracles who reside on Twitter or in closed Facebook groups where they regularly post their predictions about the price of Bitcoin and other cryptos. Their weapons include charts which show historical ups and downs of the markets, Elliot waves, MACDs, RSIs and other magical tools which they use to draw lines on charts. They also use some serious slang like Head and Shoulders, Double Bottom, Dead Cat Bounce and Death Cross.

You might have heard about the last one because the death cross is a very hot topic in the crypto world right now. The lines have crossed. Bitcoin is dead. It won't go up again. Really? Let's look into it and see what that actually means.

A death cross is a crossover resulting from a security's long-term moving average breaking above its short-term moving average or support level.

This is a definition of the Death Cross from Investopedia. In other words, a death cross happens when an average short-term movement of the price crosses the average long-term movement of the price. This literally means that the asset will likely continue it's movement downwards.

Does this mean that Bitcoin is dead? No. Does this mean that the price of Bitcoin will be falling forever? No. Want to hear a contrast opinion? Some say that a death cross is actually a bear trap. (Bears are the people who think the market will go down. Read my post about crypto slang to learn more fancy words).

Let's zoom out a little bit and change perspectives. Yes, Bitcoin is below the December highs of $19,000, but it is waaaaaaaaaay above the highs of April 2017.

Now, because of the death cross, two different camps of oracles (chart analysts) debate about which interpretation of the market is correct whilst the price of Bitcoin keeps falling. This is a neverending circle - the more the price falls, the more people scream because of fear.

As mentioned above, some think that this death cross is a bear trap because the RSI index shows that the asset is oversold meaning we might be nearing the bottom. In this case, we will confirm the double bottom correction which will, in turn, conclude the overall correction. But who knows?

Don't put too much time and effort into the technical analysis of the crypto market. No one actually knows where the price is going to go. TA shows what the market is experiencing now. It doesn't show the future, but can instead help you understand the current market better.

When do you think Bitcoin will finish its correction? Or do you think the price will keep falling? Discuss it in our Crypto Discussion Group on Facebook!