Bitcoin faces intensified selling pressure as two critical technical signals suggest the possible onset of a bear market. The cryptocurrency recently triggered a death cross and recorded its first weekly close below the 50-week moving average since October 2023.
These developments come amid broader financial market uncertainty and highlight the growing challenges for Bitcoin’s short-term recovery prospects.
Technical Indicators Highlight Bearish Momentum
A death cross occurs when the 50-day moving average falls below the 200-day moving average, signaling weakening short-term momentum relative to the long-term trend. This is often interpreted as a bearish indicator in financial markets.
Bitcoin’s price has declined nearly 14% over the past week, trading near $91,600 according to CoinGecko. Last week’s close below the 50-week moving average, positioned just above $100,000, marks the first such weekly close under this key level since the bull market began in October 2023.
This shift raises concerns about Bitcoin’s ability to mount a near-term recovery, as prior weekly closes above the 50-week moving average had signaled the start of bullish trends.
On-Chain Metrics and Market Sentiment
Supporting the bearish outlook, CryptoQuant’s Bull Score index shows eight out of 10 major on-chain metrics signaling negative momentum. These indicators align with the ongoing sell-off in the cryptocurrency market.
Farzam Ehsani, CEO of VALR, attributes the crypto market decline largely to investor apprehension in traditional markets. He noted that cryptocurrencies often correlate with tech stocks, which have recently faced selling pressure as investors take profits from AI-focused equities.
Derivatives Market Reflects Speculative Bearish Positions
Data from derivatives markets reveal that open interest has surpassed levels seen on October 10, suggesting continued speculative activity despite the downward trend. A combination of declining cumulative volume delta and rising open interest points to increased short position opening.
Additionally, the 25-delta skew has dropped into negative territory, indicating that options traders are actively buying puts for downside protection.
Signs of Dip Buying Amid Downtrend
Despite the bearish signals, some data from perpetual contracts indicate investors are beginning to buy on dips. An increase in the funding rate and a spike in bid-ask delta at 5% to 10% price depths reflect this cautious optimism.
If Bitcoin fails to stabilize, these dip buyers may be forced to sell, potentially triggering a long squeeze that could intensify the price decline.
Outlook: Recovery Hinges on Key Price Levels and Economic Factors
Ehsani anticipates a possible short-term rebound if Bitcoin consolidates above $100,000. He cites two main catalysts for improved market sentiment: a confirmed Federal Reserve rate cut in December and strong U.S. economic data showing effective inflation control.
However, he emphasizes that a sustained recovery would require Bitcoin to break above $105,000 to reestablish confidence in an upward trend. Until then, selling pressure is expected to dominate, limiting recovery attempts.
