A death cross is a bearish technical indicator that is commonly used in the stock and cryptocurrency markets. It occurs when a short-term moving average (such as the 50-day moving average) crosses below a long-term moving average (such as the 200-day moving average).
The death cross is considered a bearish signal because it suggests that the short-term trend of the market is now weaker than the long-term trend. In other words, it indicates that the market is likely to continue to decline in the short-term.
In the cryptocurrency market, a death cross can be an indicator that a bear market is on the horizon. It’s important to note that this is not always the case, and a death cross can also be a signal that the price is just in a short-term consolidation phase before continuing to rise. Traders use other technical indicators or fundamental analysis to confirm the death cross or to see if it is a bear trap.
It’s also important to note that death cross is not a timing indicator and it doesn’t indicate when exactly the trend will change. It’s a signal that the trend is changing. Traders should use it as one of the factors to support their decision making but not as the only indicator.
