Bitcoin finally showed signs of life over the weekend, rallying by five percent to test the 22 exponential moving average on the daily chart.
However, the rally might be short-lived as the daily death cross looks to become increasingly likely with the 50 EMA sloping down towards the 200 EMA.
In order to invalidate a potential death cross Bitcoin needs to climb above the 200 EMA at $8,650 and attempt to break above the $8,800 level of resistance.
The daily death cross has only happened twice since 2014. Both crosses acted as a precursor to a respective 70% and 64% move to the downside.
If Bitcoin sees a drop of that magnitude from here it will take the price down to yearly lows of $3,150, although the $1,800 level is also being touted as a potential target.
Immediate targets to the downside would be $7,400, $6,750 and $5,900, the latter of which held as support throughout the 2018 bear market.
If the death cross comes into fruition, it would almost certainly signal a new bearish phase in the market, making the $14,000 high in June a local top for the foreseeable future.
One bullish indicator for Bitcoin is the daily stochastics, which crossed to the upside over the weekend for the first time since October 7. Following the previous cross Bitcoin rallied by 10%, so while the odds are stacked against the cryptocurrency markets, there is still a glimmer of hope.
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Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.