Bitcoin’s Seventh ‘Golden Cross’ in 10 Years Approaching – What Does This Mean for BTC Price?
In light of the recent rally that has seen it rise more than 40% since the beginning of the year, Bitcoin is about to experience only its seventh so-called “golden cross” in the last 10 years. A golden cross is a technical event where the 50-day simple moving average (SMA) crosses north of the 200-day SMA. Some technicians and traders interpret a golden cross as either a buy signal, or at least a sign that price momentum has changed in a bullish direction.
Assuming there is no sudden and sustained more than 30% collapse in the price of Bitcoin, the world’s largest cryptocurrency by market capitalization and the first successful implementation of cryptographically secured blockchain technology, Bitcoin’s 50-day SMA should move above the 200-day. SMA in about a week.
How Has Bitcoin Performed After Golden Cross Events?
If you were to have bought Bitcoin at the time of each of the last seven Golden Cross events and held for 90 days, you would have been up on your investment four out of seven times. The margin on these gains would have varied wildly between 10-80%. One time out of seven you would have been flat after 90 days, and on two occasions you would have been down (by 20% and 45%).
If you were to have lasted 365 days, you would have been up five out of seven times. Again, the range of gains over this time period varies wildly from 25% to 400%. The two occasions when you would have been down after 365 days coincided with the brutal bear markets of 2014 to early 2015 and from late 2021 to late 2022.
If you adjust the buy signal and say that you only buy when a golden cross occurs at the end of a prolonged bear market (not during a choppy bull market), the results are slightly different and arguably more bullish. If you bought and held for 365 days after the Golden Cross events of July 2015, October 2015 and April 2019, you would have returned (roughly) 130, 120 and 25% respectively.
As in these mentioned occasions, the 50-day SMA has now been below the 200-day SMA for an extended period. Imagine that Bitcoin continues to trade around $23,000-$24,000 at the time of the upcoming golden cross. A 100% gain in the next year is possible given previous results. So we could possibly be talking about Bitcoin hitting the mid-$40,000s in early 2024.
Is The Bitcoin Bear Market Over?
Such a rise in Bitcoin’s price over the next year is easy to imagine when you consider these factors.
First, 2023 is much more likely to be a year of easing economic conditions (which is usually crypto-bullish) than of tightening economic conditions (as 2022 was). That’s because inflation appears to be falling quickly, as acknowledged by the Fed this week, the Fed is nearing the end of its tightening cycle and may even cut interest rates by the end of the year to support a US economy that could soon fall into recession.
Also, Bitcoin’s bear markets historically only last about a year and several chain and technical indicators are flashing now that the bottom of the 2022 bear market is in (as discussed in this recent article).
At the same time, long-term trends in Bitcoin’s wider adoption (i.e. users and investors) remain positive, and the asset should soon gain greater legitimacy as regulators in key markets (such as the US, UK and EU) work to bring in a comprehensive crypto market. legislation. Another golden cross thus adds to the list of arguments for why the Bitcoin bear market is over.
