Bitcoin recently hit what traders call a "death cross". Many investors who track the cryptocurrency's movements see Bitcoin's downward momentum as a sign. Analysts at capital management firm QCP Capital predict that Bitcoin will reach its bottom in October with an eventual decline, MarketWatch reported.
What is the Bitcoin death cross?
When asset prices' 50-day averages fall below their 200-day averages, analysts refer to it as a 'death cross'. The appearance of the table in question on market charts gains a cross-like appearance. Since the averages indicate that interest in the investment asset has fallen sharply, a negative term like death cross is used. In Bitcoin's case, the death cross first appeared in January 2022.
When the near-term average of the asset price falls below its long-term average, it clearly means that long-term investors are losing money. However, many technical analysts point out that 50-day averages below the 200-day averages bring about steeper declines.
Looking at historical data, Bitcoin lost 2.3% on average in the week after the death cross, according to Dow Jones indicators. In the six months after Bitcoin's last death cross in 2022, the cryptocurrency fell 51.7%.
Is the bottom near for Bitcoin?
According to analysts at QCP Capital, Bitcoin could reach its bottom by the end of October. The analysts base their prediction on chart analysis of Bitcoin and a series of upcoming macroeconomic developments for cryptocurrencies.
The US Federal Reserve may take a more hawkish stance than investors expect at its monetary policy meeting next week. This is because the US Consumer Price Index (CPI) data for August increased by 0.6%, the sharpest upward momentum in 14 months.
However, investors in the futures markets still give a 97% probability that the FED will keep policy rates unchanged at the next meeting.
Meanwhile, bankrupt crypto exchanges FTX and Mt. Gox are expected to sell some of their crypto assets to pay their creditors. According to OCP analysts, this could affect prices in digital asset markets.
FTX sales
Bankrupt crypto exchange FTX on Wednesday received approval from judges to sell crypto assets it says are worth over $3.4 billion to repay creditors.
A large portion of these assets are held in Solana and Bitcoin, according to previous court filings.
While some investors worry that the upcoming asset sale could put pressure on crypto prices, FTX says the sale will be limited to $100 million worth of tokens per week. According to the crypto exchange's plan, the sale limit could be increased up to $200 million in tokens depending on the state of the markets.
Greg Moritz, Co-Founder and COO of Alt Tab Capital, notes that this amount is relatively small compared to the overall trading volume of the crypto market. Moritz reminded that Bitcoin's daily trading volume usually ranges between $10 billion and $20 billion.
Mortiz said, "Overall, the impact of the potential FTX liquidation on the crypto market is likely to remain low and is likely to occur within months. However, there is already downward pressure on many cryptocurrencies as a result of the liquidation. This is mainly due to the retail crypto market not fully understanding FTX's proposal and reacting based on fear rather than logic."
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