Bitcoin's Death Cross Signals Prolonged Bearish Trend Amidst Market Uncertainty

On April 6, Bitcoin's price formed a death cross on a daily chart, a technical pattern where the 50-day moving average (MA) falls below the 200-day MA. This pattern is historically associated with trend reversals and prolonged bearish trading periods, often preceding significant market declines. The latest death cross emerges amidst growing macroeconomic uncertainty, with equities struggling due to early stages of a tariff war, rising volatility, and pervasive investor fear. For some investors, this could be the final blow to hopes of a near-term rally, with early signs of capitulation from short-term holders already emerging.

By definition, a death cross confirms the end of a bullish phase, suggesting recent price action has weakened relative to the longer-term trend. Its counterpart, the golden cross, occurs when the 50-day MA rises above the 200-day MA, often heralding a new rally. Since its inception, Bitcoin has experienced 10 such death crosses, with the 11th unfolding right now. Analyzing their dates and durations reveals that every bear market included a death cross, but not every death cross has led to a bear market. This distinction is crucial for understanding the current setup.

There are two types of death crosses: those that occur during bear markets and the rest. The three death crosses that formed during the bear markets of 2014-2015, 2018, and 2022 were prolonged and severe, lasting 9 to 13 months and seeing drawdowns between 55% and 68% from the day of the cross to the cycle bottom. The remaining seven were far less severe, lasting from 1.5 months to 3.5 months and seeing Bitcoin decline anywhere from 27% to nothing at all. In many cases, these signals marked local bottoms and were followed by renewed rallies.

This brings us to the critical question: Is Bitcoin already in a bear market, or is this another bear trap? If Bitcoin is indeed in bear territory, as some analysts believe, the current death cross could signal 6 to 12 more months of downward price action. This outlook aligns with observations of the difference between the current market cap and the realized cap. If the realized cap is growing but the market cap is stagnant or falling, it means capital is flowing in but prices aren’t rising—a classic bearish signal. Current data clearly points to the latter, with sell pressure potentially easing anytime, but historically, real reversals take at least six months—so a short-term rally seems unlikely.

Other market participants, however, disregard the presence of the death cross. Some analysts argue that the current death cross is a setup for a rally rather than a slide. They point to previous false signals of this cycle, suggesting that this will be the most hated rally of 2025. Another analyst downplayed the signal’s significance, stating that empirically, it's total nonsense and often a good buying opportunity. Data shows that, on average, Bitcoin prices are only slightly lower one month after a death cross and often higher three months out.

Interestingly, Bitcoin isn’t the only asset flashing warning signs. Major indices and individual tech stocks are also on the verge of forming their own death crosses. Bitcoin’s recent move is part of a larger market reset, for better or for worse. At the moment, however, it leans more toward the "worse" side: what’s bad for major indices tends to be bad for Bitcoin, too. Unless, of course, Bitcoin fully claims its role as digital gold.