Bitcoin’s succession of sharp corrections from its all-time high at $64,900 has turned investor sentiment negative, at least for the short-term.
For new traders, the name death cross itself brings a lot of negativity and a feeling of impending doom.
Due to this, buying dries up and investors holding positions rush to the exit due to panic, exacerbating the decline.
Before looking at a few death cross examples in the crypto markets, let’s see how the pattern has affected the S&P 500 index between 1929 to 2019.
After the death cross on June 19, 1930, the S&P 500 plummeted 78.84% before bottoming out on Sep.
This shows how in select instances, the death cross has been able to predict a sharp correction.
The most recent death cross occurred on March 26, 2020, when the BTC/USD pair closed at $6,758.18.
By then, the pair had already corrected 33% from the high at $13,868.44 made on June 26, 2019.
From the high of $13,868.44 to the low at $6,430, the total decline was roughly 53%.
17, 2017, and the death cross formed on March 30, 2018, when the pair closed at $6,848.01.
This meant a further fall of about 54% from the death cross and a total drawdown of 84% from the all-time high.
The above instances show how the death cross occurs late in the bear market cycle and investors who wait for the pattern to form give a lot of profits back to the market.
The examples show how the death cross is a lagging pattern, which forms when a large part of the decline has already occurred.