Analyst: There is no sign of easing in the sell-off, Bitcoin forms a "death cross", and the subsequent trend is unclear

The news that the People's Bank of China has once again introduced virtual currency regulations triggered a market sell-off. The Bloomberg terminal technical chart shows that the price of Bitcoin has formed a "death cross", which means that its average price over the past 50 days is lower than its 200-day moving average. The largest cryptocurrency by market value has fallen 40% in the past two months.

However, Matt Maley, chief market strategist at Miller Tabak + Co, told Bloomberg that given that the 200-day moving average is still moving upward, this death cross pattern is not necessarily bearish: "When it starts to go down, that's something to pay attention to."

In fact, the death cross that Bitcoin formed in March 2020 did not hinder gains, as it turned higher and formed a golden cross (when the pattern reverses) two months later. But the death cross in November 2019 led to a lower price for the coin a month later.

“China’s crackdown probably does weaken its momentum,” said Jeffrey Kleintop, chief global investment strategist at Charles Schwab. “I’m not sure it’s a signal of a long-term change in direction, but it will certainly create some volatility. No one is sure the extent of the crackdown, and China is a big player in the bitcoin market.”

Some chart analysts also said that Bitcoin, which failed to break $40,000 last week, could retest the $30,000 level, which it briefly touched during the May sell-off. If that happens, Bitcoin may have a hard time finding support in the $20,000 range.

Other cryptocurrencies also retreated, with the Bloomberg Galaxy Crypto Index, which tracks some of the largest digital currencies, falling nearly 13% at one point on Monday to its lowest point since February.

“There’s a lot of fear, and when there’s fear, people sell risk assets,” Meltem Demirors, chief strategy officer at CoinShares, said on Bloomberg’s “QuickTake Stock” streaming show. “Investors in general are easily uneasy.”