Bad Days For Bitcoin Are Back As ‘Death Cross’ Approaches

A person holding physical Bitcoin commemorative coins in Edmonton, Alberta, Canada on January 7, 2022. Photo: Artur Widak/NurPhoto via Getty Images (Getty Images)

Bitcoin, the very wasteful, inherently speculative cryptocurrency celebrates the new year by flatlining.

According to BloombergBitcoin recently dropped to 6%, briefly dropping below $40,000 ($39,774) — the cryptocurrency’s worst start to a year since 2012. That’s more than 40% of its nearly $69,000 peak just a few months ago. ago in November 2021 As of early Monday afternoon, Bitcoin has been hovering around $41,320 in value.

A senior financial market analyst at City Index, Fiona Cincotta, told Bloomberg that the cryptocurrency has had “a pretty shocking start in 2022. There’s a lot going on. We know Bitcoin is volatile, but even for Bitcoin we’re seeing some really big ones. movements.” Jay Hatfield, the CEO of Infrastructure Capital Advisors, made a bearish prediction that if the Federal Reserve reduces “liquidity injections” intended as a pandemic stimulus, “Bitcoin 2022 could end up below $20,000.” (Bloomberg) reported separately that it expects the Fed to raise interest rates at least four times by 2022 in an effort to avoid over-speculation, in addition to phasing out its bond buying program by March 2022.)

Many cryptocurrency investors see $40,000 as an important, if somewhat arbitrary, marker of Bitcoin’s potential price floor. Falling significantly below that amount for an extended period of time would, to put it simply, freak out many Bitcoin holders.

Coindesk reported on Monday Bitcoin seems to be approaching a situation called the “death cross,” which is when the 50-day moving average dips below its 200-day equivalent. Investors often take this as a sign that the short-term momentum behind an investment is slowing, indicating that a bull market is about to break. However, Coindesk noted that the death cross is an unreliable indicator and Bitcoin has encountered it at least three times since October 2019. In any case, the cryptocurrency’s value rose soon after. That situation is known as a bear trap, which basically means that anyone hedging against the cryptocurrency that continues to fall in value has made a bad bet.

CoinDesk wrote that analysis by Kraken, a cryptocurrency exchange, rather uselessly concluded that previous Bitcoin death crosses indicated “a sell-off in the days that followed or a continued macro downtrend confirming a bear market.” Forbes quoted different analysts because they generally agree that the situation for Bitcoin will continue to be ugly in the coming weeks.

Another factor in the crash appeared to be instability in Kazakhstan, where security forces have been brutally cracking down on violent protesters in recent days who were outraged by rising energy costs and the government of President Kassym-Jomart Tokayev. More than 160 dead and 8,000 arrested have been reported after troops open fire with live ammunition in Almaty when Tokayev ordered security forces in a public speech to shoot without warning. The attempt to quell the disagreements involved a widespread internet outage, which cut mining facilities in Kazakhstan from the global network. CoinDesk reported separately that about one-fifth of Bitcoin’s global hashrate (the vast amounts of energy-guzzling processing power that fuels Bitcoin’s blockchain) is located there; Mining activities were severely disrupted from January 5-6. It wasn’t until Monday that most of the miners were back online.

As always, there are clear signs that the cryptocurrency stalwarts will continue to do so, just as they have during previous downturns in Bitcoin’s inevitable boom and bust cycle. have been through countless crashes before, major Bitcoin fans have learned to remain somewhat drowsy during recessions, expecting the speculative frenzy to return after a few months. According to Bloomberg, Noelle Acheson, Genesis Global Trading’s head of market insights, suggested the plunge was due to short-term investors cashing in. She told the network that long-term investors “bought the dip”, referring to buying the cryptocurrency at what they see as a premium rate.

So-called “meme coins”, referring to a class of tokens like Dogecoin whose value is based almost entirely on speculation related to the news cycle and social media interest, also crashed. Dogecoin, which peaked at 74 cents in May, stood around 14 cents Monday afternoon, while a counterpart called Shiba Inu coin suffered a similar catastrophic loss since its own peak. The outlook wasn’t generally bad for people who sunk thousands of dollars into dog-themed jokes, with… Bloomberg Reporting another meme coin called Baby Doge had doubled in value since the beginning of the year (of course it can and will crash anytime).

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