A Signal to Sell, or a Hidden Cue for a Major Bull Run?

• Bitcoin’s bearish cross historically precedes significant price rallies.
• Current market indicators hinted at possible short-term volatility, followed by a potential uptrend.

The cryptocurrency market appears to now be seeing Bitcoin [BTC] struggle to establish a consistent upward trajectory.

Despite reaching heights close to $62,000 and lows around $56,000 in the last two weeks, Bitcoin’s price fluctuations have left investors questioning its next move. 

At press time, the cryptocurrency was trading at approximately $58,550, reflecting a minor 0.7% increase over the past day, with fluctuations between a 24-hour high of $59,833 and a low of $57,812.

Bitcoin: Indicators of a possible downturn

Amidst this uncertain market behavior, a notable pattern has emerged that could hint at future price movements.

Bitcoin has formed what is known as a “bearish cross” on its daily chart, a technical indicator that might suggest a looming decline. 

Source: Mags on X

This term refers to the event when Bitcoin’s 50-day simple moving average (SMA), currently at $61,749, drops below its 200-day SMA, which stands at $62,485.

This configuration, often seen as a signal of short-term market weakness, was pointed out by the pseudonymous trader Mags on the social media platform X (formerly Twitter).

While the formation of this pattern on the chart may sound straightforwardly negative, that might not necessarily be the case now.

Mags pointed out that historically, the formation of this bearish cross pattern on BTC’s chart has been followed by significant rallies. 

For example, following a bearish cross in September 2023, Bitcoin’s price surged by approximately 50% within four months. Similarly, after a cross in July 2021, the price increased by 54% in the same timeframe. 

Mags suggests that if this pattern holds true, Bitcoin may once again experience a period of fluctuating prices before potentially reclaiming its moving averages and initiating a bullish cross, leading to another strong rally.

The underlying fundamentals

Despite the focus on chart patterns, it’s worth considering Bitcoin’s fundamental metrics, which offer insights into the broader market stance and investor behavior. 

Recent data from Glassnode showed that the number of active Bitcoin addresses saw a significant decline from 897,000 in early July to 615,000 by mid-August. 

Source: Glassnode

However, there has been a recent uptick to over 725,000 addresses, marking a rise of approximately 17.89%.

This increase in active addresses could suggest a growing engagement within the Bitcoin network, potentially signaling a positive shift in market sentiment.

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Furthermore, the number of new Bitcoin addresses, an indicator of fresh investor interest, has also shown signs of recovery.

After dropping to 251,000 in early August, there has been an increase to over 300,000 new addresses, indicating renewed interest and potentially more capital inflow into Bitcoin.

Source: Glassnode