Bitcoin's 'Death Cross' Returns: Understanding Its Significance

Bitcoin's recent "death cross," which occurs when the 50-day moving average falls below the 200-day moving average, has sparked fresh discussions among investors. Matthew Sigel from VanEck highlights its historical context and explains how this signal can vary in meaning depending on market conditions.

Key Takeaways

The "death cross" occurs when the 50-day moving average drops beneath the 200-day moving average.
Historical data shows that the 6-month median return after a death cross is +30%, with a 12-month return of +89%.
Market conditions significantly influence the interpretation of a death cross signal.
Different scenarios can result in drastically different outcomes after a death cross, ranging from strong recoveries to prolonged declines.

Bitcoin death cross news

The Relevance of Bitcoin's Latest Death Cross

The conversation around Bitcoin's "death cross" is back on the radar, with many investors reaching out for clarification on what this means for the market. Matthew Sigel, the head of digital assets research at VanEck, has noted an increase in questions regarding this recent signal. His analysis presents a reassuring perspective, underscoring that this is a "lagging indicator."

Sigel shared a comprehensive overview on X, displaying a table of past Bitcoin death crosses dating back to 2011. The statistics reveal a median return of +30% over six months and +89% over twelve months, with a 64% positive hit rate following these indicators.

Bitcoin death cross history

Analyzing Past Death Crosses

What’s particularly interesting about these crosses is the context from which they arise. Sigel identified various market regimes, suggesting that a single technical signal can signify drastically different outcomes based on the current stage in the market cycle.

For instance, death crosses labeled as "bottom" have appeared in cyclical downturns presenting promising results. In 2011, the death cross occurred amid the aftermath of significant price drops, leading to a whopping +357% return over the next year. Similarly, in 2015 and 2023 (marked as cycle bottoms), returns were +82% and +173% respectively over six months.

Contrarily, in a “structural bear” market, signified by patterns from years like 2014, 2018, and 2022, the results were less encouraging, with losses reaching -56% in 2014 and -52% in 2022. These scenarios reflect downturns where a death cross confirms existing negative trends rather than signaling potential recovery.

The intermediate classifications matter too. For instance, 2019 saw modest gains labeled as a "late bear" market, while 2021, tagged as a "late cycle," had mixed results, illustrating the volatility investors faced as market dynamics shifted.

Looking ahead to 2024, prospects labeled as "post-ETF regime" indicate promising returns, suggesting an evolving landscape influenced by structural demand.

Conclusion

Ultimately, the revelation surrounding death crosses isn't that they guarantee bullish behavior. Instead, what they predominantly represent is a retrospective signal influenced by the prevailing market context. As such, understanding the specific cycle you’re in—be it bottoming, late bear, or other regimes—will shape whether this signal is a harbinger of positive trends or simply market noise.

As of now, Bitcoin's price stands at $86,631.

Bitcoin price
Bitcoin remains positioned between the 0.618 and 0.786 Fibonacci levels according to the 1-week chart.