Bitcoin’s price is nearing a ”death cross,” which is typically seen as a bearish signal. However, historical data suggests it often precedes a bullish rally. Other analysts predict a potential drop to the $40,000 range before the next bull run. Meanwhile, Mt. Gox creditors are holding their Bitcoin, which helps stabilize the market, while Morgan Stanley has authorized its 15,000 financial advisers to start recommending Bitcoin ETFs to clients.
Bitcoin’s Death Cross May Lead to Gains?
Bitcoin’s price action is fast approaching a “death cross,” but one crypto analyst believes it might not be as ominous as it sounds based on historical patterns. Instead, this could be a bear trap before BTC enters a big bull rally.
Bitcoin / TetherUS 1D (Source: TradingView)
A death cross happens when the 50-day simple moving average (SMA) of an asset’s market price falls below the 200-day SMA, which signals bearish momentum. Historically, however, this indicator has a poor track record of predicting future price trends and very often results in a “bear trap,” where a bearish move reverses, forcing traders to abandon short positions.
Bitcoin analyst Timothy Peterson shared a historical chart showing BTC’s price performance one to two months after a death cross. He pointed out that since 2015, a death cross has happened eight times. 67% of the time BTC ended up rallying within two months after the crossover, and the median return was+18%.
Bitcoin confirmed a death cross on Sept. 12 of 2023, which triggered a bear trap. BTC bottomed out at $24,000 before rising to a new all-time high on Mar. 14, 2024. This suggests that the death cross might be very unreliable as a stand-alone indicator.
One analyst called Trader Tardigrade supports the bear trap theory, and stated that Bitcoin’s recent drop to $49,000 might signal the start of a new super bull rally. Tardigrade shared analysis from 2013, showing a similar pattern in 2016 that led to a parabolic run peaking in 2017.
However, this pattern took place only once and may need validation in the current cycle, especially considering the different macroeconomic and geopolitical conditions at play at the moment.
Bitcoin May Fall to $40K Before Next Bull Run
According to Markus Thielen, head of Research at 10x Research, Bitcoiners should wait on the sidelines until BTC’s price falls to the low $40,000 zone to get the best entry price ahead of the next bull run. Thielen stated in an Aug. 7 report that to ideally time the next bull market entry, Bitcoin prices should fall into the low 40,000s, and he anticipates another major rally attempt after this drop.
The last time Bitcoin was in this range was on Feb. 6 when the crypto king was trading hands at $42,577, according to CoinMarketCap data.
Thielen is not alone in this belief. Other analysts also predict Bitcoin could fall into the $40,000s in the next few months. Timothy Peterson, founder of Cane Island Alternative Advisors, also pointed out that $40k and $80k are equally likely in the next 60 days.
Crypto Rover also suggested that if Bitcoin breaks its current support, $40k is next. David Gokhstein, the founder of Gokhstein Media, also wants to see Bitcoin drop to $50K or even $40K, as he believes it is a perfect opportunity to buy more.
With expected near-term volatility, Thielen advises against a buy-and-hold strategy, as Bitcoin and Ethereum (ETH) currently don’t offer the same high risk-reward ratio seen recently in US stock markets. He still believes Bitcoin’s current price could be a good buying opportunity but still suggests setting a stop loss at $54,000, as the risk is to the downside.
Thielen also referred to the fact that there have been consecutive days of outflows from ETFs. He pointed out that investors in US-based spot Bitcoin exchange-traded funds (ETFs) are now underwater since the average price is around $60,000. Given Bitcoin’s current downtrend, retail investors may now hesitate to engage in massive buy-the-dip ETF flows as they usually follow trends.
Mt. Gox Creditors are Holding Their Bitcoin
One factor that could give BTC a bit of a boost is the fact that Mt. Gox creditors are not selling their Bitcoin. Mt. Gox collapsed after a devastating security breach that left about 127,000 creditors waiting to recover their funds.
Over a decade later, many creditors are still holding onto their Bitcoin. Data shows that almost half of the Bitcoin owed to Mt. Gox creditors has already been distributed. Despite the fact that over $3.2 billion in Bitcoin has been distributed, the market hasn’t seen a sell-off related to this distribution.
The recent 20% plunge in Bitcoin’s price was completely unrelated to Mt. Gox repayments, and resulted from weaker economic data in the US and the Bank of Japan raising interest rates.
A Glassnode report shared that the Mt. Gox distribution is the final chapter in a major market overhang since 2013. The choice to receive claims in BTC rather than fiat and resisting offers throughout the legal process suggests creditors have a long-term hodler mentality. This mentality could explain the lack of a sell-off.
According to Bitpanda deputy CEO Lukas Enzersdorfer-Konrad, early adopters of Mt. Gox view Bitcoin as more than an asset, which has an effect on when and in what volumes they might sell. StealthEX CEO Maria Carola added that creditors expect future price appreciation and aim for higher returns, while also considering capital gains taxes.
Glassnode reported that many creditors are still active in the crypto space. Some investors revealed they received part of their claims, with some moving their Bitcoin to cold storage wallets while planning to sell their Bitcoin Cash soon. Others also intend to sell Bitcoin Cash and convert it to Bitcoin.
The collapse of Mt. Gox in 2014 forced creditors to hold onto their coins as their value surged by over 10,000%. This makes continued holding rather unsurprising, considering Bitcoin’s strong performance year-to-date, and the successful launch of spot Bitcoin ETFs.
Bitstamp US CEO Bobby Zagotta also pointed out that Bitcoin is now viewed as an appreciating asset, especially after creditors saw their holdings appreciate since losing access to them.
The Mt. Gox repayments have had a very minimal long-term impact on the crypto market. Exchange volumes have remained stable, showing resilience despite a minor uptick in sell-side pressure. The market also demonstrated resilience during the German government’s Bitcoin sell-off. Ultimately, the Mt. Gox distribution served as a stress test for the market that ended up proving its strength and resilience.
Bitcoin Mt. Gox vs German Government Balance Change (Source: Glassnode)
Bitcoin ETFs Get Morgan Stanley’s Approval
Meanwhile, Morgan Stanley has authorized its 15,000 financial advisers to start recommending Bitcoin ETFs to clients on Aug. 7. This is a major milestone for the crypto industry, as Morgan Stanley manages around $3.75 trillion, including $1 trillion in self-directed client accounts. The two recommended products are BlackRock’s iShares Bitcoin Trust (IBIT) and Fidelity’s Wise Origin Bitcoin Fund (FBTC).
Roxanna Islam, head of sector and industry research at VettaFi, shared that there has been strong demand across all client segments since the launch of these spot crypto ETPs. Matt Horne, head of digital asset strategists at Fidelity Investments, also believes that there is very strong potential of this asset class among retail investors, registered investment advisors (RIAs), institutional investors, and beyond.
Matthew Sigel, VanEck’s head of digital assets research, believes continued uptake by leading advisory platforms could lead to a surge of inflows into spot BTC ETFs. Previously, the largest financial advisory firms were hesitant to embrace spot crypto ETFs, with inflows mainly coming from independent shops or RIAs. According to Horne, the RIA community tends to be early adopters of investment vehicles, and this trend has continued with the recent spot crypto ETPs.
Morgan Stanley’s move to recommend BTC ETFs is an important development, and will hopefully drive further adoption and inflows into the crypto market.
This article was originally Posted on Coinpaper.com
