Bitcoin Plots ‘Death Cross’ on Its Price Chart, Next Target $8,600?

Bitcoin prices fluctuated on Thursday as traders weighed signs of an economic recovery against rising pandemic cases.

The cryptocurrency has risen more than 150% from its mid-March lows. But the cryptocurrency's rise has been almost in sync with the U.S. stock market. Now, observers, including legendary investor Warren Buffett, believe stock market sentiment has become disconnected from economic reality. That means a larger correction could be underway.

Fundamentally, this puts Bitcoin in a dilemma. A crash in the U.S. stock market could cause investors to sell off profitable positions in the cryptocurrency market in order to get cash. Therefore, the correlation between the two could continue to exist even during such difficult times.

This was even more evident this week when Bitcoin and the S&P 500 moved hand in hand. On Thursday, the benchmark cryptocurrency fell 1.20% against the dollar to $9,263, while the leading U.S. stock index closed 0.1% lower at 3,115.34.

The S&P 500 fell on concerns about rising pandemic cases amid the U.S. reopening, while Bitcoin plunged on profit-taking sentiment. Traders failed to hold the key technical resistance level of $9,500, resulting in a downside correction of about $300.

As Bitcoin’s bearish trend extends, its four-hour technical chart analysis shows that the price of Bitcoin will fall further significantly in the coming trading sessions.

Bitcoin price chart shows death cross

Earlier this week, a death cross was depicted on the cryptocurrency price chart, a bearish pattern that occurs after an asset’s short-term moving average closes below its long-term moving average. As shown in the chart, the 50-day moving average (blue MA) on Bitcoin’s 4-hour chart slipped below the 200-day moving average (orange MA).

The last time this happened was in February 2020, causing the price of Bitcoin to fall by more than 50%. The last crash also stemmed from the collapse of global markets, a "black swan event" that prompted investors to sell all possible assets to raise cash. Nevertheless, the death cross of the 50-day moving average and the 200-day moving average still played an important role in the crazy decline.

Bitcoin’s “Descending Wedge”

In the current scenario, Bitcoin faces similar technical and macroeconomic risks. As the global economy enters a recession, the number of pandemic cases is rising. The only thing that can save cryptocurrencies from collapse is the stimulus policies introduced by central banks.

Investors don’t need cash, which could limit Bitcoin’s bearish bias somewhat. Meanwhile, the cryptocurrency is in a bullish pattern, the so-called “falling wedge,” that predicts a return to above $10,500.

Bitcoin price chart shows it is in a falling wedge

But the same indicator first needs to push Bitcoin price lower. The cryptocurrency recently rejected wedge resistance to test its lower trendline. It could continue downward within the wedge parameters until it gets closer to the end of the pattern — the point where its upper and lower trendlines converge.

This suggests that Bitcoin still has room to fall towards $8,600, a reliable support level that also coincides with the descending wedge line. At the same time, the death cross may target the $8,600 level for the next pullback. (Baijiahao)