The "Bitcoin Change" shop in Tel Aviv has a depiction of the digital currency.
Jack Guez of the Agence France-Presse is pictured.
A death cross is a bearish technical signal that suggests more downside, as evidenced by the 40% sell-off from its mid-November high.
A death cross occurs when the 50-day moving average crosses below the 200 day moving average. Technical analysts and traders follow that signal.
The death cross signal is likely to be generated over the coming days because of the fact that the 50- and 200-day moving averages are just $1,000 apart. The 50-day average is falling faster than the 200 day average.
The lagging indicator can help alert traders to securities that are solidifying their downtrend and are likely to experience a continuation. In June 2021, prices fell nearly 20% before bottoming out a month later.
Several head fakes have been caused by previous moving-average crossovers of bitcoin. In February 2020, a bullish golden cross in the virtual currency appeared. The death cross occurred two weeks after the price of bitcoin bottomed.
If the death cross in bitcoin is a successful trading signal, one logical area of support is $37,400. A move to that level would have a 10% downside potential.
In a Monday note, Stockton highlighted that both bearish and bullish signals are being thrown off by bitcoin.
"If the monthly MACD indicator flips to a'sell' signal, we would view that as a catalyst to reduce long-term exposure," said Stockton.
The traditional death cross between the 50-day and 200-day moving averages is not tracked by the MACD indicator.
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