Bitcoin’s Coming “Death Cross” Could Trap Bears

The Bitcoin (BTC) death cross pattern, which showed bullish price action in September 2023 and is now approaching, looks set to tarnish its reputation again.

The reasons for this can be listed as follows: Bank of Japan (BOJ) Governor Shinichi Uchida’s statement that the central bank will not increase borrowing costs even though markets are unstable, weakening the case for “yen transfer transactions” to continue, and the emergence of a risk aversion situation in risk assets, including bitcoin.

“We need to maintain the current levels of monetary easing for now as we see sharp volatility in domestic and overseas financial markets,” Uchida said in a speech in Hakodate.

The BOJ’s latest comments imply a limited decline in the cryptocurrency even as the death cross looms, characterized by the cryptocurrency’s 50-day simple moving average (SMA) breaking below its 200-day SMA.

Following Uchida’s comments, bitcoin briefly topped $57,300 as the Japanese yen (JPY) weakened against the U.S. dollar (USD). Japan’s Nikkei stock index rose 4%, signaling a reversal of risk, and futures tied to the S&P 500 rose 0.8%.

Yen spread trading involves taking out loans in cheap yen and investing in high-yielding currencies and risk assets, such as the Mexican peso. The strategy has been popular in recent years as the Bank of Japan has kept interest rates at zero while other banks, including the Fed, have been rapidly raising borrowing costs to combat inflation.

But the DOJ raised interest rates last Wednesday, the first time it has abandoned its current monetary policy in 17 years. The move triggered a hit to carry traders, leading to risk aversion across the market. BTC fell from $66,000 to $50,000 on Monday.