Bitcoin is staring down the “Death Cross” technical indicator after falling 36% in the last two months to its current level of $43,000.00 U.S.
The Death Cross arises whenever an asset’s average price over the last 50 days drops below that of its 200 day moving average, an indication that its momentum is headed downward.
And although it hasn’t occurred yet, Bitcoin is likely to hit the Death Cross later this week as its price continues to drift lower.
Ethereum, the second-largest digital token by market value, also looks to be on track to form a Death Cross after it slumped 33% since early November to around $3,200.00 U.S.
Cryptocurrencies have been under pressure in recent weeks, with Bitcoin dropping more than 35% since reaching an all-time high of almost $69,000 U.S. in early November. The latest stretch lower for digital assets is happening as odds rise that central banks will commence a series of interest rate hikes as soon as March.
The Death Cross indicator is supposed to be bearish but Bitcoin’s track record around Death Cross formations remains murky. It reached a Death Cross pattern in June of last year, and another one in March 2020 proved no impediment to gains as it turned higher and formed a “Golden Cross,” which is when the pattern is reversed two months later.
But a Death Cross formed on Bitcoin in November 2019 saw the largest digital coin trading lower one month later.
Meanwhile, the International Monetary Fund (IMF) issued a warning that parallels between cryptocurrency price moves and the stock markets could pose a risk to financial markets. Correlation between U.S. stock indexes and Bitcoin jumped to 0.36 in 2020, up from 0.01 between 2017 and 2019, according to the organization.
The 100-day correlation coefficient of Bitcoin and the S&P 500 currently stands at 0.44. That’s the highest such reading since the fourth quarter of 2020 and among the highest going back a decade. A coefficient of 1 means the assets are moving in lockstep, while minus-1 would show they’re moving in opposite directions.
