The recent drop in Bitcoin price towards the $80,000 zone has officially validated a feared technical pattern known as the death cross, signaling the possible start of a prolonged bear market. Analyst Rekt Capital confirmed this Friday that the macroeconomic bullish structure has been invalidated after losing key supports and closing the week in red. This event marks a critical turning point, as the general trend has shifted in favor of sellers in an environment of high volatility.
Technical indicators are conclusive: the 50-day simple moving average (SMA) crossed below the 200-day SMA this Sunday, a negative event not recorded since January 2024. Furthermore, realized losses by investors exceeded 800 million dollars, an alarming figure not seen since the FTX collapse in November 2022.
According to Glassnode data, short-term holders are driving the bulk of this capitulation, massively selling their assets at a loss to avoid further drops. This washout of marginal demand indicates that recent buyers are hastily withdrawing during the correction.
Can historical demand stop a 70% drop this time?
This chart pattern possesses a grim history that deeply worries analysts, as in all previous cycles it preceded crashes of between 64% and 77% in the asset’s value. On the other hand, after confirming the death cross in January 2022, the price eventually sank to $15,500, dragged down by systemic factors.
Likewise, in March 2018 and September 2014, declines of 67% and 71% were observed respectively. Mister Crypto recently questioned why this time would be different, suggesting that history tends to rhyme in the cycles of the leading cryptocurrency and its corrections.
The invalidation of the macro trend by closing below the 50-week exponential moving average places the asset in a position of extreme technical weakness against the bears. Therefore, if the price fails to quickly reclaim lost levels through an immediate relief rally, the bullish market structure will be considered definitively broken.
IT Tech, an analyst at CryptoQuant, noted that the inability to reclaim the cost basis usually confirms a deeper negative trend. Thus, the current panic selling could be just the beginning of a much longer and more painful redistribution phase.
The current landscape suggests that fear among short-term holders could extend the downward trend toward the April support at $74,500. However, the confluence of bearish indicators like the SuperTrend on the weekly chart reinforces the high probability that sellers will maintain control of the market.
Investors will need to watch if the market manages to absorb the selling pressure in the coming days or if, on the contrary, a much more severe and deeper correction materializes that tests the conviction of long-term holders.
