Bitcoin (BTC) has seen a significant decline, crossing below the $100,000 mark as it approaches a critical technical event known as a death cross. This phenomenon occurs when the 50-day simple moving average (SMA) drops below the 200-day SMA. Historically, such patterns have often been associated with market bottoms, raising the question of whether this current downturn signifies the actual bottom or merely a precursor to a more extensive capitulation phase.
Analysts are closely monitoring the impending Bitcoin death cross, which is projected to occur around mid-November, potentially within the next few days. According to analyst Colin, BTC is expected to continue declining before this crossover happens, with altcoins likely experiencing even greater drops. Colin emphasized that the imminent death cross could serve as a timing indicator for when the market might hit its bottom.
Over the past seven years, Bitcoin has experienced at least eight death cross events, and historical data suggests that BTC typically forms a local bottom within 5 to 9 days after such occurrences, often rallying by at least 45% from these lows. Given the recent drop below $100,000, some projections indicate that if this dip is indeed the local bottom, BTC could surge to around $145,000 thereafter.
Supporting this viewpoint, analyst Ash Crypto pointed out that in the last three instances of the death cross, Bitcoin has bottomed within a week, subsequently rallying to new all-time highs. However, a more cautious outlook has emerged from another analyst, who noted that while the death cross is imminent, the average maximum loss following such events has often exceeded 30% within a year. Historically, BTC has taken an average of 141 days to reach a peak post-cross, leading to projections of potential retracement towards the $70,000 region.
The current situation raises two primary scenarios: either a rapid capitulation followed by a robust recovery or a prolonged downtrend if macroeconomic conditions deteriorate. Historically, an alignment of the death cross with a final capitulation has often resulted in sharp recoveries in the weeks following. However, there remains the risk that the death cross could signal a deeper correction, in line with the average historical drawdown of roughly 30%.
It is crucial to underscore that a death cross is primarily a timing mechanism and does not guarantee a definitive market bottom or top. Traders are encouraged to consider additional factors such as trading volume, RSI/MACD divergences, on-chain activity, and stablecoin liquidity to gauge market conditions more accurately.
Currently, the prevailing scenario leans towards a short-term capitulation process, followed by the formation of the Bitcoin death cross and a potential strong rebound. Nevertheless, short-term traders are advised to manage risk diligently, including setting appropriate stop-loss levels and waiting for confirmation of recovery, such as a daily close above the 50-day SMA accompanied by rising trading volume, before making significant investments.
