Is History Repeating Itself with a Dot Com-Style Crash? Analyst Issues Warning!
The dot-com bubble, which affected tech stock prices in the late 1990s and early 2000s, was caused by media coverage of the burgeoning Internet business and investors’ expectations of dot-com profits. When interest rates soared, the dot-com crash was directly caused.
The Federal Reserve raised the fed funds rate, which affects most other interest rates, and this drove investors away from risky assets like internet startup stocks and into bonds. The second factor was the March 2000 Japanese recession, which caused a global selloff that drove more money out of risky markets and into bonds.
Now, popular crypto expert Benjamin Cowen is warning traders about Bitcoin’s first weekly death cross. When a short-term moving average falls below a long-term one, a death cross occurs. Cowen explains that BTC’s 50-week SMA is $24,678, and its 200-week SMA is $24,999. In a bear market, prices often do not drop below the 200-week simple moving average.
However, we have been mostly trading below that level since June. Cowen predicts a worst-case scenario for Bitcoin would be for it to behave like the Nasdaq in the midst of the dot-com meltdown in 2000-2002. He quoted a 77% pullback, a 60% recovery to the 50-week SMA, and a sluggish bleed towards the ultimate bottom follow.
A glimmer of hope comes from statistics showing whales within the Bitcoin community are using the opportunity to buy at current levels. However, people are concerned about whether the BTC death cross hypothesis would hold water in the event that the markets crash due to a big shock in terms of macro factors. Currently, one Bitcoin is worth $22,012, and the 24-hour trading volume is $16.6 billion. Bitcoin’s price has risen by 1.54% in the past day.