“Loss of life cross” is a technical term used in the inventory buying and selling industry. It denotes an unusual combination of the 50- and 200-day value averages. Although death crosses are never a good thing, crypto experts will be unconcerned.
A “death cross” pricing event looms for the two largest cryptocurrencies and, without a significant rise, might occur later this week. The phrase “death cross” has a frightening ring to it, but should crypto investors be concerned?
To find out, Decrypt visited with some seasoned crypto traders. But first, let’s define what a dying cross actually is.
The term comes from the world of traditional stock investing, and it refers to a situation in which two moving averages—the 50-day and the 200-day—intersect. (Shifting averages describe the average closing value over a specific time period.)
In theory, the chart traces that characterize these averages should rarely or never meet. This is because the 200-day average not only includes the 50-day average, but also shows a four-fold longer trend. Any price spikes or dips that occur over the course of the 50-day period should be mostly smoothed out by the longer-term trend.
If the two traces cross, it signifies the value has gone so much up or down that the 50-day development on the value chart has crossed the 200-day development. A golden cross is formed when the 50-day line crosses the 200-day line in an upward direction. It is, however, a dying cross when it occurs on a downward descent.
The imminent dying cross events can be seen in the chart below, courtesy of Bloomberg. We’ve added a scarlet arrow to show where the 50- and 200-day averages for Ethereum are about to meet, and a blue arrow to show where the 50- and 200-day averages for Bitcoin are about to meet.
As you can see, the gap between the lines is narrower for Bitcoin, implying that the dying cross is more likely to happen first.
Is it true that if a dying cross occurs, the value of the asset in question–be it a token or an inventory–is doomed?
The appearance of a dying cross in the case of a traditional stock or the stock market as a whole is bad news, especially as similar events have historically preceded numerous major and prolonged downturns. And for other traders, the appearance of a dying cross serves as a signal to flee before things become much worse.
When it comes to Bitcoin, the story is a little different. While reaching a death cross isn’t a pleasant experience, the unique cryptocurrency has done so on several occasions in its 11-year history, the most recent in June of 2021. And, in any case, the one-of-a-kind cryptocurrency has turned out to be really great.
Analysts from two major crypto businesses, which control the price of Bitcoin and Ethereum in the billions of dollars, agreed.
“Merchants obviously observe staple technical indicators, with the 50, 100, and 200 [day moving averages] being key,” wrote a Genesis buying and selling desk employee in an email. “The ‘dying cross’ is on the radar, but it doesn’t appear to be a huge event.”
An employee at another large crypto firm, who did not want to be identified for compliance reasons, was similarly unconcerned.
“People make it out to be a huge, terrifying bearish event, but the last time it happened, the market bottomed out and was quickly pumped back up,” the analyst wrote in an email. “Equally, the market sank after touching $64k in June ’21, fueled by leverage. This time, the sell-off could be due to the Federal Reserve’s ambitions to reduce its balance sheet.”
Kyle Samani, the founder of Multicoin Capital and a long-time cryptocurrency trader, was particularly forthright.
“TA is garbage,” he remarked on Twitter, using the dealer abbreviation for “technical evaluation.”
Because all three participants have a vested interest in the value of crypto remaining healthy, skeptics may dismiss their comments as overly optimistic.
Nonetheless, the long-term value trend of both Bitcoin and Ethereum has moved steadily upward, despite several pops and crashes over time and despite their disastrous start in 2022—so another brush with a dying cross is unlikely to signal long-term catastrophe.