Get the weekly summary of crypto market analysis, news, and forecasts! This Week’s Summary The crypto market ends the week at a total market capitalization of $1,09 trillion. Bitcoin is up by over 2% to reach around $27,200. Ethereum increased by nearly 6% to close to $1,700. XRP gained almost 2% in value during a highly volatile week. Almost all altcoins are trading in the green, with virtually no exceptions. The DeFi sector maintains the total value of protocols (TVL)…
What Is Death Cross in Crypto Trading?
A “death cross” is a technical indicator used in cryptocurrency trading when the 50-day moving average (MA) crosses below the 200-day MA on a price chart. This event is seen as a bearish signal by traders and is thought to indicate a potential further decline in the cryptocurrency’s price.
The 50-day MA is calculated by taking the average price of a cryptocurrency over the past 50 days, while the 200-day MA is calculated using the average price over the past 200 days. The intersection of these two moving averages is known as a death cross because it signals a potentially significant change in market sentiment.
When the 50-day MA falls below the 200-day MA, the short-term price trend turns downward and may indicate a longer-term bearish trend. This can be due to various factors, such as market sentiment, supply, demand, or overall market conditions.
A practical example of a death cross in cryptocurrency trading can be seen in the chart of Bitcoin from 2018 to 2019. In June 2018, Bitcoin experienced a death cross when the 50-day MA crossed below the 200-day MA. This signaled to traders that a significant price decline was likely to occur.
In the following months, Bitcoin’s price fell from around $7,500 to a low of just over $3,000 in December 2018. This was a significant drop of almost 60%, and many traders who saw the death cross as a bearish signal may have exited their positions or even shorted Bitcoin to profit from the downward trend.
However, it’s worth noting that while the death cross can be a useful tool for traders, it’s not a foolproof strategy. In some cases, a death cross may not lead to a significant decline in price, or a reversal may follow it in the short-term trend.
Therefore, traders must use the death cross with other technical indicators and fundamental analysis to make informed trading decisions. It’s also essential to remember that cryptocurrencies are highly volatile and can experience rapid price swings, making it critical to have a solid risk management strategy.
How To Spot Death Cross in Crypto Trading
To spot a death cross in crypto trading, you must plot the 50-day moving average (MA) and the 200-day MA on a price chart. Most trading platforms and charting tools provide this functionality.
Here are the steps to spot a death cross in crypto trading:
- First, open the price chart of the cryptocurrency you are interested in trading.
- Next, select the 50-day and 200-day moving averages from your trading platform’s charting tools or indicators section.
- Plot the moving averages on the chart.
- Look for the point where the 50-day MA crosses below the 200-day MA.
- If the 50-day MA crosses below the 200-day MA, it indicates a death cross, which is a bearish signal.
- Consider other technical indicators and fundamental analysis to make an informed trading decision.
It’s important to note that the death cross is just one indicator among many used in technical analysis, and it should not be relied upon as the sole basis for trading decisions. It’s also essential to consider other factors, such as market sentiment, trading volume, and overall market conditions.
Additionally, using the death cross with other technical indicators and fundamental analysis is important to make informed trading decisions. For example, traders may also use support and resistance levels, trend lines, and momentum indicators to confirm the bearish trend signaled by the death cross.
The death cross is a technical indicator used in cryptocurrency trading to signal a potentially bearish trend when the 50-day moving average crosses below the 200-day moving average. Traders can use this signal with other technical indicators and fundamental analysis to make informed trading decisions. While it can be a useful tool, it’s not a guarantee of future price movements and should be used alongside sound risk management practices.
To spot a death cross in crypto trading, you must plot the 50-day moving average and the 200-day moving average on a price chart and look where the 50-day MA crosses below the 200-day MA. However, using the death cross with other technical indicators and fundamental analysis is important to make informed trading decisions.
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