Bitcoin Extremely Close to 'Death Cross' Chart Pattern

Chart analysts are seeing an alarming pattern in bitcoin’s recent trends, one they call a “death cross.”

A death cross occurs when the short-term moving average, which is an average of which direction a security is moving, breaks below its long-term moving average. As that point, both short- and long-term moving averages tend to fall, so a “death cross” is a bearish signal indicating further losses.

The chart pattern is named after the cross shape that the moving averages make and the resulting downward spiral. It can occur in individual stocks or in various funds, as well as in other assets like cryptocurrency. (See also: Bitcoin Bloodbath: Price Nosedives as $53 Billion Wiped off Crypto Market Cap.)

Spotting a Death Cross on a bitcoin chart

With bitcoin, its short-term, 50-day moving average is rapidly closing in on its long-term, 200-day moving average. It’s the closest the two figures have been in nine months, and, if they cross, it would be the first time since 2015.

Above: A Death Cross occurs when the 50-day SMA crosses the 200-day SMA, which looks ripe to happen (image: Investopedia using Tradingview)

Some analysts say that the death cross is not a good indicator for timing. In other words, a decline is not necessarily imminent right when the short-term average slips below the long-term average. They also say that the death cross does not guarantee future declines, as other market forces can drive the security – or currency – higher.

Bitcoin, a volatile asset, has had a rough week, sliding on growing concerns about regulation, including in the U.S. and Japan. (See also: Bitcoin May Be Spared in Government Cryptocurrency Crackdown.)

The value of the bitcoin briefly slipped below $8,000, but has since recovered. It’s up about 2% in early Friday trade, with its value at about $8,475.88 per U.S. dollar. (See also: Bitcoin Bubble ‘Probably Just About to Burst’ Says Allianz Global Investors.)

Investing in cryptocurrencies and Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns no stake in bitcoin or cryptocurrency-related securities.