Bitcoin safe after ‘Death Cross’ but study finds crash cannot be averted

April 3, 2018 1:24 pm


The Death Cross was intersected but markets breathed a sigh of relief when Bitcoin actually rose in value.

But don’t bet on this being a case of market upturn.

A new study found the reasons behind previous Bitcoin crashes and predict a new one has to come to balance the damning data it found.

Read: Another one “Bit” the dust: Is it time to hit the Bitcoin panic button?

Near death experience   

According to Coindesk, the so-called “death cross” happened over the weekend, but instead of crashing, Bitcoin (BTC) has made moves into positive territory from a 54-day low of $6,443 on Sunday.

The Death Cross is a technical indicator that monitors any crossover between the 50-day moving average (MA) and the 200-day MA.

Currently, the BTC has surged another 6% from Monday’s $7,000 mark to reach $7,300 +or as the Cryptocurrency Market Gains $10 billion.

On March 25, the price of BTC was around $9,000, with relatively strong volumes on both the bitcoin futures market and cryptocurrency exchanges.

Read: The living dead: You just can’t kill them cryptos!

Potential headwind

The New York Times reported that the founders of an ICO called Centra were arrested for distributing securities without the authorization from the US Securities and Exchange Commission (SEC).

These types crackdowns put a strain on the BTC and other cryptos and could lead to price losses.

CNBC said Bitcoin shedded 25% last week, as major U.S. stock markets fell and it is still down more than 50 percent year to date.

“Cryptocurrency prices have taken a beating in 2018 after news of regulatory crackdowns, major hacks, tech companies banning advertising and investor uncertainty around the upcoming tax season,” said CNBC.

Read: UAE, Saudi under siege: Rising threat has crippling effect

Undervalued and crash ready

Fortune said researchers at ETH Zurich found a formula called Metcalf’s Law that showed BTC’s value is proportional to the square of the number of active users in the network, “and they suspect that the currency is overvalued.”

“Drawing on an equation that can capture how speculative bubbles evolve and grow, researchers at the Swiss university were able to observe how the cryptocurrency’s value rises with participation.”

The business site added that researchers say they can now better track and spot potential future crashes.

“On at least four different occasions — one each in 2011, 2012 and 2013 plus the most recent at the end of 2017 — the model had determined a fundamental value was heavily exceeded by bubbles that grew and burst,” Fortune said.

Their analysis “indicates current support levels for the Bitcoin market in the range of $22–$44 billion, at least four times less than the current level,” the researchers said, according to a March 29 MIT Technology Review article.

They said: “Our analysis identifies a substantial but not unprecedented overvaluation in the price of Bitcoin, suggesting many months of volatile sideways Bitcoin prices ahead.”

Based on this law, CNBC said BTC’s market value by the end of the year should be no more than $77 billion.

“That’s $41 billion, or nearly 35% less than BTC’s market capitalization as of Monday or $118 billion.

Bitcoin multiplied more than 13 times in price last year, but fell 50% in the first three months of 2018.

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Hadi Khatib
By Hadi Khatib
Hadi Khatib is a business editor with more than 15 years' experience delivering news and copy of relevance to a wide range of audiences. If newsworthy and actionable, you will find this editor interested in hearing about your sector developments and writing about it.



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