a-history-lesson-on-death-crosses

tl;dr: A ‘death cross’ may happen soon. People attribute this to long-term downtrends but history tells us this isn’t always the case. Keep an open mind, plan for the best; plan for the worst, or, even better, just shut out the noise and keep holding.

One of the near-term concerns for market participants is BTC’s imminent death cross. Simply put, a death cross is when the 50D SMA falls below the 200D SMA and can foreshadow a major sell-off and/or confirm a bear market. When looking back since BTC’s inception, we can see several instances whereby a death cross occurred and either did or didn’t weigh materially on price. Since many of these crosses occurred during a bear market, it came as no surprise that the death cross was followed by further downward pressure. However, with the death cross on pace to form in a little over a week (June 18), some are concerned that said cross will send the price lower and may even confirm BTC being in a bear market.

Until that time comes, it is too early to say with absolute certainty what will happen when BTC’s death cross comes. However, that doesn’t mean we shouldn’t be cognizant of what has happened in the past and lean on the past to set our expectations. That said, let’s take a look at BTC’s previous death crosses…

Death Cross 1: March 25, 2020

r/CryptoCurrency - A History Lesson on Death Crosses

  • This death cross came off the back of March 2020’s notorious “Black Thursday.”

  • Price went on to correct -16% over a 5-day period before regaining momentum and trending higher.

  • What’s most notable about this death cross is that BTC was already making higher highs leading into the cross itself. Unfortunately, the same can not be said of BTC’s forthcoming death cross.

Death Cross 2: October 26, 2019

r/CryptoCurrency - A History Lesson on Death Crosses

  • This death cross came several months after BTC hit a local high of roughly $13,400 in June and then entered into a downtrend. 

  • On the day of the death cross, BTC surged as much as +19% before then resuming its downtrend. BTC also went on to trend lower into year-end.

  • While we can clearly see that BTC exploded +40% between October 25 & 26, many forget that what drove this move higher was China’s President Xi saying the country should “seize the opportunity” to adopt blockchain.

Death Cross 3: March 31, 2018

r/CryptoCurrency - A History Lesson on Death Crosses

  • When this death cross occurred, it was already apparent to many that BTC was in a bear market. Anyone who was in the market at this time knew that 2017 was absolutely bonkers and BTC’s blow-off top from $20K was likely the beginning of the end.

  • That said, although BTC only corrected -11.5% in the two days that followed, BTC went on to ultimately trend lower despite rallying considerably higher in April 2018

Death Cross 4: September 14, 2015

r/CryptoCurrency - A History Lesson on Death Crosses

  • This death cross stands out quite a bit, mostly because it came 9 months after BTC set a bear market bottom in January.

  • Not only that, but BTC went on to rally nearly +120% into the first week of November. BTC would go on to correct -40% before regaining momentum and entering into its next bull market cycle.

  • Lastly, you can see that this death cross coincided with no material move to the downside, the price largely traded sideways.

Death Cross 5: September 4, 2014

r/CryptoCurrency - A History Lesson on Death Crosses

  • As with most other death crosses, BTC was already in a bear market when this cross occurred and many knew it at the time. 

  • Furthermore, the price was largely unchanged in the days that followed this cross. However, BTC did go on to sell-off meaningfully in the weeks that followed before slipping lower as the bear market carried on.

Death Cross 6: April 9, 2014

r/CryptoCurrency - A History Lesson on Death Crosses

  • Leading up to this death cross, BTC was in a downtrend for months and off -65% from its all-time high of ~$1,200 set in November 2013. That said, it comes as no surprise that what followed this death cross was further weakness.

  • Perhaps what was surprising was the fact that BTC would correct more than -25% in the next couple of days that followed.

  • BTC would go on to bounce higher and press to a local high of $550 come mid-April and even $680 in June, but BTC’s inability to set a higher-high in the macro trend only resulted in BTC continuing its slump lower.

Death Cross Avoided: August 2013

r/CryptoCurrency - A History Lesson on Death Crosses

  • In all of BTC’s history, August 2013 was the only instance where a death cross was just barely avoided. 

  • BTC’s ability to rally higher after roaring to an all-time high of $280 and correcting -83% caught many by surprise. The abrupt rebound is ultimately how BTC dodged scoring a death cross.

  • BTC would go on to climb as high as $1,200 before entering into a bear market.

So, What Does It All Mean???

With the exception of a few, many of BTC’s death crosses coincided either with 1). a sell-off in the days that followed and/or 2). a continued macro downtrend that confirmed a bear market. That said, one ought to be open-minded about the forthcoming death cross being accompanied by downside price action and potentially even a continuation of the current downtrend. 

On the flip side, we should also remember that BTC doesn’t have to do anything. All market cycles are different and there are a number of things that make this market cycle different from others. With that in mind, one could argue there is just as good of a chance of BTC doing nothing/climbing higher as there is of BTC plunging. At the end of the day, wherever the market converges to is what will happen. Don’t expect for anything to occur, but do plan for the worst.

[source: Kraken Intelligence Daily Report]

By steven

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