It was unimaginable that 2022 would be such a defining year for the cryptocurrency industry. The 2021 year was a record-breaking year for virtual assets, with record highs and massive growth. Investors expected that the market would recover even though the year ended in a downtrend.
The cryptocurrency enthusiasts seem to be disappointed by 2022. After experiencing a severe slump in recent months, Bitcoin now appears to be heading towards a terrible pattern called the “death cross”. The Bitcoin death crossing will affect not only BTC investors but also other digital tokens.
Bitcoin saw a record price of US$68,000. This was in October 2021, when Bitcoin ETF first appeared on the NYSE. The digital token’s price has fallen steadily since then. This is the longest losing streak since August 2019, and the worst start of a year since 2012. Investor panic set in when BTC’s price remained below its psychological resistance level at US$40,000 for a brief time on Monday.
Although the price recovered, the bitcoin death cross appears to be rapidly approaching. The ‘death cross’ refers to when Bitcoin’s 50-day average crosses its 200 day average. This is the sign of the end for the bull run. To avoid the death cross symptoms, Bitcoin must keep above US$40,000. After Fed raised borrowing costs at least four times, the price fell.
Investors have been frightened by the constant decline in BTC’s value. The cryptocurrency market has also seen a significant decline in value. In the last weeks, USD340 million worth cryptocurrency was liquidated according to Coinglass. The Bitcoin death cross has not only taken a toll upon BTC investors but also affected Ethereum, Binance Coin and Solana’s prices.
Why is Bitcoin in a Grave Situation
Experts already believe that the Bitcoin death cross will soon be here. This could alert investors and trigger a sell-off. BTC’s price plummeted to new lows during a sell-off. This happened in a very short time. Bitcoin’s value fell to US$36,000.500 in just 24 days on May 30, 2021. Even worse was the March 2020 situation, when Bitcoin’s value fell from US$8,000 down to US$4,000 in a matter of hours.
Bitcoin is in trouble due to the Federal Reserve’s serious inflation measures. BTC has fallen nearly 40% since October, when it hit a record high. Although Bitcoin found resistance at US$50,000, it was unable to hold its value for long.
Why Death Cross Scary?
A death cross usually indicates a decrease in market prices, which may or not indicate further declines. In the past, death crosses have been seen on the global financial market in 1929, 1938 and 1974. This is the first instance of a death cross for the Bitcoin market. There were some signs of Bitcoin’s death in June 2021 and March 2020, but the market rebounded before hitting rock bottom.
What should investors do at this point?
There are two types of Bitcoin investors. The first is for long-term investors, while the second is for short-term investors. These price drops might not seem so difficult for long-term investors, who employ the buy-and-hold strategy to profit. Short-term investors may be on the edge, however, as they might have invested in BTC at US$60,000 and lost US$20,000 per token. There are also investors who use Bitcoin to transact. The death cross may be tormenting for them as well.