Bitcoin and various other cryptocurrencies have experienced a significant downward trend this year, resulting in a loss exceeding $1 trillion in value.
Bitcoin (BTC) has plummeted from a year-high of $109,300 to $82,000, while well-known altcoins such as Ethereum (ETH), Ripple (XRP), and Cardano (ADA) have faced even steeper declines.
This drop in cryptocurrency prices stems from growing anxiety in the financial markets. The crypto fear and greed index has fallen into the extreme fear territory, with a reading of 19. Likewise, the fear indicator monitored by CNN Money has also decreased to 20.
The primary driver of this downturn is the increasing worry that the United States may be heading into a self-induced recession, largely attributed to tariffs imposed during Donald Trump’s presidency.
These apprehensions have overshadowed positive developments in the crypto sector. For instance, the Securities and Exchange Commission has concluded several lawsuits involving companies such as Uniswap, Kraken, and Coinbase.
Moreover, Donald Trump has enacted an executive order aimed at establishing a strategic reserve for Bitcoin and a stockpile of digital currencies. Additionally, more institutional players, including Citadel, BlackRock, Rumble, and Trump Media, have begun accumulating Bitcoin.
Bitcoin and altcoins may encounter additional declines if the S&P 500 index forms a death cross pattern—a technical occurrence that arises when the 50-day and 200-day moving averages intersect. This pattern typically signals the onset of a prolonged bearish market.
The gap between the 50-day and 200-day weighted moving averages (WMA) of the S&P 500 index continues to tighten. Currently, the 50-day WMA is at $5,900, while the 200-day WMA sits at $5,857. A crossover would likely lead to further declines, as the index fell by 23% the last time this pattern emerged in 2022.
The S&P 500 index is often regarded as a key indicator of the crypto market, as both are seen as risky assets that tend to move in tandem.
Bitcoin has already experienced a death cross
In the meantime, Bitcoin’s price has already formed a death cross, as the 50-day and 200-day moving averages have intersected. This occurred after Bitcoin fell below a crucial support level at $89,000, the neckline of a double-top pattern at $108,500. A double top is considered one of the most bearish formations in technical analysis.
Thus, the most probable outcome is that Bitcoin may drop to either $73,722 or $68,960 before staging a recovery. The initial target aligns with the highest swing observed in March of the previous year, while the second target corresponds with the peak from November 2021.
A potential factor that could mitigate further declines in the S&P 500 and the crypto market is the impending decision on interest rates from the Federal Reserve next week. A more dovish stance, as suggested by indicators in the US dollar index and the bond market, could likely lead to a rebound.