Bitcoin and other cryptocurrencies have remained in a strong downtrend this year, shedding over $1 trillion in value.
Bitcoin (BTC) has crashed from the year-to-date high of $109,300 to $82,000, while popular altcoins like Ethereum (ETH), Ripple (XRP), and Cardano (ADA) have had deeper dives.
Crypto prices have fallen due to rising fear in the financial markets. The crypto fear and greed index has dropped to the extreme fear zone of 19. Similarly, the fear gauge tracked by CNN Money has dropped to 20.
The main catalyst for this sell-off is growing concern that the United States is heading toward a self-inflicted recession due to Donald Trump’s tariffs.
These fears have outweighed positive news in the crypto industry. For example, the Securities and Exchange Commission has ended numerous lawsuits affecting companies like Uniswap, Kraken, and Coinbase.
Further, Donald Trump has signed an executive order to create a strategic Bitcoin reserve and digital coins stockpile. Also, more institutional investors like Citadel, Blackrock, Rumble, and Trump Media have started to acquire Bitcoin.
Bitcoin and altcoins could face further declines if the S&P 500 index forms a death cross pattern — a technical formation that occurs when the 50-day and 200-day moving averages cross each other. This pattern often signals the start of a prolonged bear market.
The spread between the 50-day and 200-day weighted moving averages (WMA) of the S&P 500 index has continued to narrow. The 50-day WMA is at $5,900, while the 200-day WMA is at $5,857. A crossover would likely lead to further downside, as the index dropped 23% the last time it formed this pattern in 2022.
The S&P 500 index is often seen as a reliable indicator for the crypto market since both are considered risky assets and tend to move in correlation.
Bitcoin price has already formed a death cross
Meanwhile, Bitcoin’s price has already formed a death cross, with the 50-day and 200-day moving averages crossing each other. This cross happened after Bitcoin dropped below key support at $89,000 — the neckline of the double-top pattern at $108,500. A double top is one of the most bearish patterns in technical analysis.
Therefore, the most likely scenario is that Bitcoin drops to either $73,722 or $68,960 before bouncing back. The initial target is the highest swing in March last year, while the second is the highest point in November 2021.
A potential catalyst that may prevent further S&P 500 and crypto market crash is the upcoming Federal Reserve interest rate decision next week. A more dovish tone as the US dollar index and the bond market suggests would likely lead to a rebound.
