Bitcoin's Potential Plunge to $40,000? A Warning Signal Emerges

A cryptocurrency analyst has observed the re-emergence of a technical analysis (TA) indicator that has previously signaled significant price drops for Bitcoin.

Key Takeaways

A significant bearish signal has returned for Bitcoin, indicated by the MACD.
Recent MACD crossover suggests a potential price drop to $40,000 if history repeats itself.
A recent "death cross" has emerged between the 50-day and 200-day SMAs, indicating further bearish trends.
Bitcoin's current price stands at around $88,800, reflecting a decline in recent days.

Bitcoin

Understanding the Monthly MACD Signal for Bitcoin

In a recent update on platform X, analyst Ali Martinez discussed a particular signal in the Moving Average Convergence/Divergence (MACD) related to Bitcoin. The MACD is a popular TA tool used to time buy and sell opportunities based on price movements.

The MACD comprises two lines: the MACD line and the signal line. The MACD line is calculated by subtracting the 26-period exponential moving average (EMA) from the 12-period EMA. The signal line, on the other hand, follows the 9-period EMA of this difference.

Crossovers between these two lines can generate buy or sell signals. When the MACD line crosses above the signal line, it is considered bullish, while a crossover in the opposite direction is deemed bearish.

Recently, Martinez shared a chart illustrating the shifts in Bitcoin’s monthly MACD over the years:

Bitcoin MACD

As seen in the above chart, Bitcoin’s MACD has recently experienced a crossover, with the MACD line declining and now positioned below the signal line. This phenomenon typically suggests a bearish trend. Martinez highlighted previous occurrences of this pattern, noting that the last three sell signals resulted in declines of over 60% for Bitcoin.

“If this pattern recurs, the analysis indicates a potential target of $40,000,” Martinez remarked. It remains to be seen whether Bitcoin will follow this established trend or diverge this time.

Additional Bearish Indicators for Bitcoin

The descent of the MACD line below the signal line is not the only bearish crossover Bitcoin has faced lately. In another update on X, Martinez noted a classic “death cross” occurring between Bitcoin's 50-day simple moving average (SMA) and 200-day SMA.

Bitcoin Death Cross

The chart indicates that the 50-day SMA has recently fallen below the 200-day SMA, coinciding with the current downturn in the Bitcoin market. Historically, such signals have marked local price bottoms for Bitcoin. However, in 2022, this crossover initiated a bear market.

Since the appearance of the death cross, Bitcoin has continued to decline, suggesting that this time the crossover might signal a more significant shift.

Current Bitcoin Price Status

As of now, Bitcoin is trading at approximately $88,800, down more than 4% over the past week.

Bitcoin Price Chart

The price of Bitcoin has shown slight recovery since hitting a low on Friday, but the market sentiments remain cautious.