Bitcoin (bitcoin) formed a trading pattern on January 8 that is widely followed by traditional chartists for its ability to predict further losses.

In detail, the cryptocurrency’s 50-day exponential moving average (50-day EMA) fell below its 200-day exponential moving average (200-day EMA), forming a so-called “death cross.” This pattern comes as Bitcoin has endured a rough two-month period, falling more than 40% from its all-time high of $69,000.

death cross history

Over the past two years, previous death crosses have been trivial for Bitcoin.For example, the March 2020 50-200-day EMA bearish crossover occurred at BTC price falls from nearly $9,000 to below $4,000, the results lag behind predictions.

Furthermore, its presence has not stopped Bitcoin from rising to around $29,000 by the end of 2020, as shown in the chart below

Likewise, July 2021 saw a death cross on the daily chart of Bitcoin, just like March 2020, which was more lagging and less predictable. It happened without causing a massive sell-off.Conversely, the price of BTC was only trading sideways before rose to $69,000 By November 2021.

However, as mentioned above, the bearish moving average crossovers in both cases are accompanied by a piece of good news that may limit their impact on the Bitcoin market.

For example, the recovery in bitcoin prices in July 2021 was largely driven by rumors that Amazon would start accepting cryptocurrencies for payments (which later turned out to be false) and after an event called “B word” Twitter CEO Jack Dorsey, Tesla CEO Elon Musk and ARK Invest CEO Cathie Wood spoke highly of Bitcoin.

Likewise, Bitcoin has recovered sharply from sub-$4,000 levels in March 2020, mostly after the Fed Announcing loose monetary policy to contain the fallout from the stock market crash caused by the coronavirus pandemic.

The death cross looks dangerous this time

Bitcoin’s latest drop reflects growing fears over the Fed Decide Actively loosening its accommodative monetary policy in 2022, including scaling back its $120 billion monthly asset-purchase program, followed by three rate hikes.

Typically, rising interest rates will make holding Volatile assets like Bitcoin Not as attractive as government bonds that offer guaranteed yields.

“This proves that Bitcoin is like a risky asset,” said Noelle Acheson, head of market insights at crypto lender Genesis Global Trading. tell the Wall Street Journal, adding that short-term holders would be “the closest to an exit.”

related: Trader warns Bitcoin could break September lows of $30,000

Therefore, the overall reduction in cash liquidity, coupled with the formation of a death cross, could trigger further selling in the Bitcoin market. However, unless BTC price bounces off the current support around $40,000, the 0.382 Fibonacci line shown in the chart below.

Nonetheless, a break below $40,000 could take Bitcoin price to the next Fibonacci support near $35,000.

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk and you should do your own research when making a decision.