If you are invested in the cryptocurrency market, chances are that you are wondering where Bitcoin is headed. The latest events in the last two weeks suggest that BTC is due for a bullish recovery. However, there is a new risk in the form of a death cross that highlights a potential risk of more downside.
Bitcoin’s 50-day moving average just crossed below its 200-day moving average, forming a death cross. Popular crypto investor Lark Davis noted that the death cross in the three-day chart has historically yielded a 50% drawdown. If the same outcome takes place, then Bitcoin might be due to another massive price drop.
Bitcoin traded at $30,613 at the time of writing and has been oscillating within the $29,000 and $31,000 price range for the last four days. Its performance seems to lack enough buying volume to push it out of the range, and this makes it susceptible to another potentially bearish shock.
Although Bitcoin has recovered slightly out of the oversold zone, the MFI is still below 20, within the accumulation zone, but it indicates low inflows. The death cross translates to an increased risk of another crash despite the expectations of a rally.
If enough BTC accumulation takes place at or near the currently low price range, then it might strengthen the current structural support. However, the opposite outcome makes it susceptible to more downside risk. There are some factors that could trigger a massive selloff. Liquidation of highly leveraged long positions near the current price range might trigger a death spiral deep enough to push BTC closer to $20,000.
Bitcoin’s on-chain metrics, specifically the exchange outflows and exchange inflows paint an interesting picture of what is happening. It currently has more exchange outflows at 57860, than exchange inflows at 46,967. However, addresses with balances equal to 1,000 BTC or more are currently registering outflows. This might be a sign that some whales and institutions are selling.
Bitcoin’s death cross and outflows from larger accounts are certainly not something to ignore. Especially coupled with the failure to achieve more upside after a major crash. The risk of a drop to or near $20,000 is a possibility, but whether it will happen is anyone’s guess. Also, such a major drop would certainly yield heavy accumulation considering the large discount.