A pricing event called the “cross of death” is approaching the two biggest cryptocurrencies and, avoiding a major price rally, could happen as early as this week.

The term “death cross” seems like a scary thing, but is it something crypto holders really should be concerned about?

THE decrypt consulted some veteran crypto traders to find out. First, let’s clarify what exactly a death cross is.

The term is technical in the world of traditional equity investing and describes an event where two moving averages (the 50-day and the 200-day) intersect. Moving averages represent the average closing price over a specific period of time.

In theory, graph lines representing these averages rarely or never intersect. That’s because the 200-day average contains the 50-day average, but it also represents a trend that is four times larger.

Regardless of whether the price rises or falls during the 50-day period, it can be greatly alleviated by the larger trend.

If the two lines cross, it means that the price has moved up or down so drastically that the 50-day trend crosses the 200-day trend on the price chart.

If the 50-day line crosses the 200-day line in a bullish direction, it is a “golden cross”. But if it happens in a bearish direction, it is a “death cross”.

You can visualize the impending death cross events in the chart below the Bloomberg. THE decrypt added a red arrow (for ether) and a blue arrow (for bitcoin) for when the 50-day and 200-day averages should intersect.

The gap between the lines is narrower for bitcoin, meaning the death cross is more likely to happen first.

(Image: Bloomberg)

If a death cross happens, does that mean the price of the asset in question (whether a token or a stock) is doomed?

In the case of a traditional stock or the stock market as a whole, the appearance of a death cross is bad news as, historically, such events preceded a number of large, prolonged declines.

And some traders treat the advent of a death cross as a trigger to close out a position before things get even worse.

The story is a little different when it comes to bitcoin. While reaching a death cross is hardly a good thing, the world’s first cryptocurrency has already registered several of them in its 11 years of existence – the most recent being in June 2021.

In some ways, the cryptocurrency has recovered quite well.

That was the sentiment of analysts at two major crypto companies that own billions of dollars in bitcoin and ether.

“Traders certainly watch basic technical indicators, as [as médias móveis diárias] 50, 100 and 200 are top,” an employee at the Genesis trading desk replied via email. “The ‘death cross’ is on the radar, but it doesn’t appear to be a significant event.”

An employee at another large crypto company, who declined to be named for compliance concerns, was also quite unconcerned.

“People make it a big scary negative event, but the last time it happened, the market went down and then went up again,” the analyst said via email.

“Similarly, in June 2021, the market fell after [o bitcoin] reach US$ 64 thousand, driven by leverage. This time, the liquidations are likely due to the Fed’s plans to reduce its balance sheet.”

Kyle Samani, founder of Multicoin Capital and veteran crypto trader, was more direct.

“AT sucks,” he said in a Twitter message, using the abbreviation for “technical analysis.”

All three commentators have an established interest that the price of cryptocurrencies remains healthy, so critics may discount their comments as undue optimism.

However, the price trajectory of both bitcoin and ether, despite numerous rises and falls over time and their dire start to 2022, has soared skyward in the long term, so another encounter with the cross of the moon is unlikely. death is an omen of lasting doom.

*Translated and edited by Daniela Pereira do Nascimento with permission from Decrypt.co.

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