One wiggly line just crossed over another. Why should that be such a big deal?
Yesterday bitcoin saw its first Golden Cross since October 2015. That’s when the 50-day moving average crosses over the 200-day moving average. Since the 50-day is a shorter-term period than the 200-day, this indicates that recent sentiment is better than it has been in the past.
In other words, things are getting bullish.
Traders like Golden Crosses because they give a good sense of where the trend is going. And with all the talk recently of the bottom being in for bitcoin, it’s another piece of evidence that bitcoin is going to start on its next and most epic bullrun soon. The Golden Cross has talismanic powers for traders who just need that little confidence boost.
But, well, hold on. The Golden Cross is a lagging indicator: it shows what has already happened, rather than predicting the future. It is bullish, by definition: short-term price action is better than long-term price action. It describes what the market has been doing as a whole over the past few months. So it does kind of reflect a change in the trend.
Except… it doesn’t always work out like we think it will. Rewind to that last Golden Cross in October 2015. It was actually the second Golden Cross that year. The first was in July when bitcoin spiked to $310 – before crashing back down below $200 once again. It was followed by a Death Cross, as the 50-day MA crossed back over the 200-day. In April 2018, mainstream traders made much of the Death Cross in the bitcoin markets, and bitcoin did indeed have a lengthy bear market ahead of it. Back in 2015, though, the Death Cross was followed by that second Golden Cross shortly after. The first Golden Cross was kind of a fake signal.
The point is, the Golden Cross alone doesn’t tell us much we didn’t already know. And if you trade on it in isolation from other indicators and signals, you might find yourself in a situation like the summer of 2015, taking a 50% loss on your BTC.
Is it bullish? Sure. Is it another piece of evidence that bitcoin is entering better times? Maybe. Is it definitive? Not really. The weeks ahead will show us one way or another.
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