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An important technical event has occurred in the Bitcoin market. For the first time in over a year, Bitcoin’s 50-day Simple Moving Average (SMA) currently at $19,825 has moved north of the 200-day SMA currently at $19,723. When the 50-day SMA crosses his 200-day SMA, the tech calls this the “Golden Cross.” This indicates that there has been a meaningful and positive change in market momentum. Tuesday’s golden cross is his seventh for Bitcoin in the last decade.
Some analysts consider the golden cross to be a buy signal, or at least include it in the set of technical and other indicators they monitor when making trading decisions. Both the 50-day and 200-day SMAs are technical indicators that are widely followed by investors, so the golden cross will likely be higher in the Bitcoin market if it encourages more buyers to enter the market. It can lead to buying pressure.
What’s next for Bitcoin after the Golden Cross?
With the golden cross confirmed, many investors are asking if this is a good buy signal. As we discussed in a recent article, the golden cross has had mixed success as a Bitcoin buying signal.
If you bought bitcoin at each of the last 7 Golden Cross events and held it for 90 days, you would have beaten your investment 4 out of 7 times. These profit margins vary widely between 10% and 80%. 1 in 7 times flattened out after 90 days and 2 times (20% and 45%) went down.
If I had held it for 365 days, it would have happened 5 out of 7 times. Again, the size of the profit over this period varies widely from 25% to 400%. From 2014 he had two opportunities in early 2015 and a brutal bear market in late 2021-late 2022 and he was down after 365 days.
If you tweak the buy signal and only buy when a golden cross occurs after the 50-day SMA has been below the 200-day SMA for a long period of time (i.e. after a Bitcoin bear market, not an unstable bull market). ), the result is arguably more bullish. Buying and holding for 365 days after the Golden Cross events of July 2015, October 2015 and April 2019 yielded returns of (roughly) 130, 120 and 25% respectively.
As in these previous cases, the most recent golden cross occurred after the 50-day SMA had fallen below the 200-day SMA for an extended period of time. Given the historical precedent, a 100% profit next year is feasible. In other words, we can easily talk about Bitcoin reaching his mid-$40,000s in early 2024.
Bitcoin is also watching Weekly Death Cross, is there a possibility that it will bottom?
Complicating things is that Bitcoin has seen its first-ever “dead cross” in weekly candlesticks. More specifically, the 50-week SMA fell below his 200-week SMA for the first time in cryptocurrency history.
But this is just one bearish signal to a growing list of bullish signals. As explained in a recent article, he flashed 7 of his 8 technical and on-chain indicators tracked in the “Bitcoin recovery from bearish” dashboard by analysts at crypto analytics firm Glassnode. , indicating that the bottom is in. A chain indicator called the Profit and Loss (PnL) Index, tracked by crypto analytics firm CryptoQuant, has sent a decisive buy signal for the first time since 2019.
As the adoption of Bitcoin by the broader population continues, there are on-chain and technical indications that the number of wallet addresses with non-zero balances could soon reach new record highs. Bitcoin’s long-term market cycle analysis, including recent threads @CryptoHornHairs and according to Bitcoin stock-to-flow pricing modelsuggesting that cryptocurrencies are probably in the early stages of a multi-year bull market.
One of the threats to the bullish narrative is if the US Federal Reserve is forced to take higher interest rates in 2023 than the market is currently pricing in. The market is now betting on a few more rate hikes of around 5.0% or more before the rate cut. Arrive at the end of the year. but, Fed Chairman Jerome Powell If warned on Tuesday, US job market It remains as strong as it has been recently, but may need to be tightened further. But we’re only talking about the possibility of another 100bps of extra rate hikes this year, much less than the over 400bp tightening he’s seen in 2022.