Bitcoin golden cross

If you would like to subscribe to this newsletter, click here. You can read our past editions here. This Wednesday, we have another interesting technical analysis term to explore in the crypto world. Golden Cross and Death Cross are two very interesting occurrences that help traders analyze the market sentiment using moving averages. What is a moving average MA? Moving average MA is the average price of specific crypto over a given period of time.

It is usually an stock indicator used in technical analysis to create an average price that gets constantly updated. Moving averages can be calculated for any number of days ranging from 10 to days and beyond. Moving averages help to determine the direction of the trend and to identify resistance and support levels. An asset may be trending in a bullish or bearish direction. When the current price of a crypto is more than a particular MA, it is considered a positive or bullish signal and vice versa.

Understanding MA is crucial to comprehend the mystery around the two concepts namely Golden cross and Death cross. A golden cross depicts a bullish momentum led by a price rise and a gathering upward momentum in the market. In a golden cross, the short-term MA moves upwards much faster than the long-term MA. The prevalent market conditions force the short-term MA to cross over the long-term MA. It occurs when the selling pressures are depleted, marking the end of a downtrend and the beginning of the golden cross.

What is the golden cross? A golden cross occurs when the short-term moving average of an asset crosses the long term moving average. Usually the short term is considered to be a period of around 50 days, while the long term is considered to be around days.

A golden cross usually starts with a downturn in both the averages, followed by the short term average crossing the long term average, and then the short term average continues trending upwards as the market remains strong. What is the death cross? Advertisement The death cross, on the other hand, is the exact opposite of the golden cross and tells you that the market is about to make a downturn, which means you may want to take your money out beforehand.

This is also marked by a crossing of the short term and long term average, however, in a death cross the short term average cuts the long term average while moving downward. It then continues moving downwards for a prolonged period, as the market settles into the bear phase.

The primary difference being in the fact that they are far more volatile than almost any other popular asset class today. In traditional trading, investors would take long term positions based on a golden cross, which may not work for something like Bitcoin or Ethereum, which sometimes change prices in a matter of hours. Some experts recommend changing the definition of short and long term.

For instance, if the day average is crossing the day average upwards, then compare a day average against the 50 and day averages. Sometimes, you will find that the day average is signalling towards a death cross. Advertisement What is a fakeout? A fakeout is basically a situation where an investor takes a position expecting an upturn, but the asset moves downwards instead.

This could happen for a variety of reasons, including unexpected regulatory moves, people suddenly cashing out and more. Example of golden cross In August, tracking platforms and price charts suddenly suggested that a golden cross was on the horizon.

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Looking back at the history of the two signals, the situation becomes even more mixed. After the cryptocurrency bottomed in , another fake out situation where the cryptocurrency Golden Crossed, then Death Crossed, then Golden Crossed again.

A Death Cross also started the bear market, until a Golden Cross took the cryptocurrency out from bear market lows. Could this be the last bullish signal before the peak is in? With a Golden Cross back, the market is now nervous of another fake out type situation, but also fearful of missing out on potential upside.

The death cross is the opposite of the golden cross as the shorter moving average forms a crossover down through the longer moving average. The most commonly used moving averages are the period and the period moving average. The period represents a specific time increment. Generally, larger time periods tend to form stronger lasting breakouts. With a bellwether index , the motto "A rising tide lifts all boats" applies when a golden cross forms as the buying resonates throughout the index components and sectors.

Day traders commonly use smaller time periods like the 5-period and period moving averages to trade intra-day golden cross breakouts. The time interval of the charts can also be adjusted from 1 minute to weeks or months. Just as larger periods make for stronger signals, the same applies to chart time periods as well. The larger the chart time frame, the stronger and lasting the golden cross breakout tends to be. Example of a Golden Cross As a hypothetical example, a monthly period and period moving average golden cross are significantly stronger and longer-lasting than the same 50, period moving average crossover on a minute chart.

Golden cross breakout signals can be utilized with various momentum oscillators like stochastic, moving average convergence divergence MACD , and relative strength index RSI to track when the uptrend is overbought and oversold. This helps to spot ideal entries and exits. A golden cross indicates a long-term bull market going forward, while a death cross signals a long-term bear market.

Both refer to the solid confirmation of a long-term trend by the occurrence of a short-term moving average crossing over a major long-term moving average. The golden cross occurs when a short-term moving average crosses over a major long-term moving average to the upside and is interpreted by analysts and traders as signaling a definitive upward turn in a market. Conversely, a similar downside moving average crossover constitutes the death cross and is understood to signal a decisive downturn in a market.

Either crossover is considered more significant when accompanied by high trading volume. Once the crossover occurs, the long-term moving average is considered a major support level in the case of the golden cross or resistance level in the instance of the death cross for the market from that point forward. Either cross may occur as a signal of a trend change, but they more frequently occur as a strong confirmation of a change in trend that has already taken place.

Many times, an observed golden cross produces a false signal. Despite its apparent predictive power in forecasting prior large bull markets, golden crosses also do regularly fail to manifest. Therefore, a golden cross should always be confirmed with other signals and indicators before putting on a trade.

The key to using the golden cross correctly—with additional filters and indicators—is to always use proper risk parameters and ratios. Remembering to always keep to a favorable risk-to-reward ratio and to time your trade properly can lead to better results than just following the cross blindly.

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