(Bloomberg) – After a string of news related to renewed raids on China sparked a bitcoin sell-off, chartists and analysts are turning to a scary-sounding technical signal.
The original cryptocurrency formed a death cross, meaning that its average price has fallen below the 200-day moving average over the past 50 days. The indicator is usually viewed as a closely watched technical measure that could give an indication of further pain.
Many analysts had expected the coin to form the gloomy sounding pattern amid a recent downturn in which it has lost 40% in the past two months.
But there is reason to believe the pattern might not be as bearish this time around, as the 200-day moving average is still rising, according to Matt Maley, chief market strategist at Miller Tobacco + Co. “If it starts to decline, that will be more convincing, ”he said.
In fact, Bitcoin’s marking of a death cross didn’t prove to be a barrier to profits in March 2020 when it turned up and formed a gold cross two months later (when the pattern is reversed). But a death cross in November 2019 caused coin trading to drop a month later.
Bitcoin fell to a two-week low on Monday, falling 11.4% intermittently to $ 31,735 after China announced it would invite officials from its largest banks to a meeting to reiterate a ban on the provision of cryptocurrency services. It’s the latest sign that China is eager to do whatever it takes to fill any loopholes in crypto trading.
Read more: China calls top banks for meeting to reinforce crypto ban
“The fact that they are cracked down on it may take some of its shine,” said Jeffrey Kleintop, Chief Global Investment Strategist at Charles Schwab & Co. “I’m not sure if this is a sign of a longer-term change of direction, but it can certainly lead to some volatility. Nobody is sure of the extent of the crackdown and China is a major player in the Bitcoin market. “
Some chartists also say that Bitcoin, which failed to recapture $ 40,000 last week, could retest the $ 30,000 level it briefly touched during its brutal sell-off in May. Should that happen, it could be difficult to find support in the $ 20,000 area.
Other cryptocurrencies also fell – the Bloomberg Galaxy Crypto Index, which tracks some of the largest digital coins, fell nearly 13% at one point on Monday, marking its lowest level since February.
Bitcoin’s profits this year have shrunk to around 11%, in line with the progress made by the S&P 500 in 2021. The coin is on the way to a third consecutive monthly loss.
“There is just a lot of fear, and when there is fear, people sell risky assets. I think Bitcoin is still perceived as a risky asset, ”said Meltem Demirors, Chief Strategy Officer at CoinShares, on Bloomberg’s streaming program“ QuickTake Stock ”. “As a rule, investors are skeptical.”
CoinShares saw outflows from the company’s exchange-traded products for six weeks. Demirors said investors are moving to stablecoins like Tether, which could drive prices higher if there is a positive market catalyst.
(Updates Demirors quote with additional information, adds second diagram.)
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