Bitcoin could hit its fourth ‘Death Cross’ with a fated fall

The godfather of all cryptocurrencies is starting the new year with a significant tumble potentially hitting a death cross, as Bitcoin fell by almost six percent, hitting below $40,000 for the first time since 2012, according to Bloomberg. 

Bitcoin hit its all-time low on New York trading, delivering a loss of approximately 14 percent. The asset’s value plunged by more than 40 percent after reaching an ascend of $69,000 in November 2021. 

“It has had a pretty shocking start to 2022,” senior financial markets analyst at City Index, Fiona Cincotta, told Bloomberg.  

“There’s a lot going on. We know that Bitcoin is volatile, but even for Bitcoin, we’re seeing some really big moves,” she added. 

On another note, the CEO of Infrastructure Capital Advisors, Jay Hatfield, told Bloomberg that the original decentralized token’s drastic plunge in value could be attributed to the U.S. Federal Reserve’s plummeting “liquidity injections,” adding that “Bitcoin could end 2022 below $20,000. 

The news hub later reported that the predicts the Fed will proceed in augmenting interest rates for a minimum of four times for the course of 2022, mainly directed by the federal attempts to control over-speculation, as well as declining the intensity of its bond purchasing program by the end of March of the current year. 

“Tighter Fed policy affects not only interest rates but the equity risk premium as the Fed withdraws funds from the capital markets. Riskier investments such as unprofitable tech, meme stocks, and cryptocurrency are disproportionately affected relative to the rest of the market since those investments are approximately twice as volatile as the overall market, so they have double the risk premium as the average stock,” Hatfield added.   

To various cryptocurrency investors, the descend of $40,000 highlights a major factor setting the ground for what could be Bitcoin’s price margin. Let’s just say if the asset maintained a drop below $40,000 for a certain period, it would be quite difficult to recover as it will set the stage for future price fluctuations. 

On Monday, CoinDesk disclosed that the original asset could be touching a state of “death cross” – when a 50-day moving margin plummets below its 200-day equivalent. 

For investors, this is an apprehensible sign that the short-term momentum related to investments is hindering, unveiling that the bull market could potentially break. While CoinDesk indicates the probable death cross situation, it also stated that it is an unreliable indicator given in 2019, Bitcoin endured almost three death crosses. 

In all three cases, the asset’s worth hastily rose after its plunge. Experts refer to this situation as a “bear trap,” referring to any bad bet made by a person hedging on the cryptocurrency exponentially falling in value. 

According to cryptocurrency exchange, Kraken established that based on Bitcoin’s past death cross incidents, the ideal action in this situation would be to “either a sell-off in the days that followed or a continued macro downtrend that confirmed a bear market.” 

In parallel, Forbes referenced various analysts’ insights collectively agreeing that the overall atmosphere around Bitcoin and other cryptocurrencies will maintain its drop in the upcoming weeks to come. 

As of the time of writing, Bitcoin’s value stands at $41,826.11 with a 0.57 percent increase since its last drop, according to CoinDesk.