(Bloomberg) – After a slew of news related to China’s resumption of crackdowns sparked a massive sell-off in Bitcoin, chartists and analysts are turning to a sinister-sounding technical signal.

The original cryptocurrency has formed a death cross, meaning its average price over the past 50 days has fallen below its 200-day moving average. The indicator is generally seen as a closely watched technical measure that could portend further difficulties to come.

Many analysts had predicted that the coin, amid a recent slowdown that saw it drop 40% in the past two months, would form the sinister pattern.

But there’s reason to believe the formation this time around might not be as bearish of a signal given the 200-day moving average is still up, according to Matt Maley, chief market strategist for Miller. Tabak + Co. “When it starts to drop it will be more convincing,” he said.

This is because Bitcoin’s marking with a death cross in March 2020 did not prevent the gains as it became higher and formed a golden cross (when the pattern is reversed) two months later. But a death cross in November 2019 saw the currency trade a month later.

Bitcoin fell to a two-week low on Monday, falling 11.4% at one point to $ 31,735, after China announced it had called officials from its largest banks to a meeting to reiterate the ban on providing cryptocurrency services. This is the latest sign that China is planning to do everything in its power to fill the gaps left in crypto trading.

Read more: China calls top banks to meeting to strengthen crypto ban

“The fact that there is a crackdown there maybe takes away some of its luster,” said Jeffrey Kleintop, chief global investment strategist for Charles Schwab & Co. “I’m not sure it is. the signal for a longer term change of direction, but it can certainly create some volatility. No one is sure the extent of the crackdown and China is a major player in the Bitcoin market. “

Some chartists are also saying that Bitcoin, which failed to recover $ 40,000 last week, may retest the $ 30,000 level, which it briefly touched during its sharp sell-off in May. If that happens, he might struggle to find support in the $ 20,000 range.

The story continues

Other cryptocurrencies fell as well – the Bloomberg Galaxy Crypto Index, which tracks some of the biggest digital coins, fell nearly 13% at some point on Monday, marking its lowest point since February.

Bitcoin’s gains this year have declined to around 11%, in line with the progress the S&P 500 has shown so far in 2021. The coin is set to record a third consecutive monthly loss.

“There is just a lot of fear, and when there is fear, people sell risky assets. I think Bitcoin is still seen as a risky asset, ”Meltem Demirors, chief strategy officer at CoinShares, said on Bloomberg’s“ QuickTake Stock ”streaming program. “In general, investors are fearful. “

CoinShares has seen six weeks of exits from the company’s exchange traded products. Demirors said investors are turning to stablecoins such as Tether, which could push prices higher if there is a positive market catalyst.

(Updates Demirors quote with additional information, adds second graphic.)

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