Death Cross Signals Potential Downturn in Crypto Market

The formation of a death cross between the 50-day and 200-day moving averages signals potential further downside in the crypto market, despite a brief rebound, according to an analyst.

Analyst Insights
“Two fairly popular moving averages, the 50 and 200 day moving averages, have drawn the so-called ‘death cross,’ which does not add optimism to the crypto market in the medium term,” YouHodler Risk Manager Sergei Gorev told The Block.

Gorev noted that while Bitcoin (BTC) market charts may indicate a potential rebound after the recent price drop, “we may soon see a new wave of cryptocurrency sales.”

Although charts suggest that Bitcoin might be posting a rebound, more price correction could be in store, according to analyst insights. As of publication time, Bitcoin traded around $58,436, down approximately 3% over the past day. The GM 30 Index, representing a selection of the top 30 cryptocurrencies, decreased 2.47% to 112.55 in the same period.

Market Sentiment
“Bitcoin open interest is decreasing more than token price depreciation, showing less confidence and interest from investors as volatility remains high. Trading volume was also lower than most weekends, indicating that the small sell-off is not supported by strong bear action,” BRN analyst Valentin Fournier said.

Fournier noted that the market is likely to remain volatile in August and September, and that Bitcoin could trend within a range as wide as $49,000 to $69,000. He recommended using the small dip to progressively increase exposure.

Last Monday, the Bitcoin futures funding rate turned sharply negative. However, according to Coinglass data, the funding rate has since flipped back to positive, indicating that investor sentiment has shifted back to a more positive outlook.

Macroeconomic Environment Catalysts for Bitcoin

According to Lawant, U.S. monetary policy and the outcome of the upcoming presidential election are factors that could significantly impact the cryptocurrency market.

He highlighted forecasts by interest rate traders, with the CME FedWatch tool showing a 51.5% likelihood of a 25 basis point cut in September and a 48.5% chance of a 50 basis point cut. A lower interest rate environment could drive investors to seek higher returns in risk assets like stocks and Bitcoin. Lawant also pointed out that futures imply a 14% chance of a total 75 basis points cut by the November meeting, which will occur just after the U.S. presidential election.

Lawant emphasized that the almost equal odds between Kamala Harris and Donald Trump in the presidential election add to the uncertainty in the digital asset space, as Harris’ stance on Bitcoin is viewed as less favorable than Trump’s.

“It is looking likely that a decisive break from the current trend will be linked to these two topics,” the analyst added.

Traders will gain insights into the likelihood and scale of potential rate cuts with the release of July’s U.S. Consumer Price Index (CPI) readings, which could impact the Fed’s confidence in initiating a rate-cut cycle, especially due to recessionary signals. The U.S. unemployment rate rose to 4.3% in July, with hiring slowing, triggering the Sahm Rule, an indicator that has historically predicted U.S. recessions.

Factors Affecting Altcoin Recovery

Meanwhile, Solana led losses among major cryptocurrencies, sliding 4% over the past 24 hours. FalconX Head of Research David Lawant stated that an improvement in narratives and liquidity trends is necessary for a sustained recovery in altcoins.

“However, as fully-diluted valuations approach pre-bull market levels, it may be time to watch this market more closely,” he added.

The Sui token has bucked the trend in the cryptocurrency market, surging as much as 8% in the past 24 hours and 82% over the past week. Grayscale added Bittensor and Sui to its list of crypto investment products, with its Grayscale Sui Trust focusing exclusively on the protocol’s native token.