Golden Cross Approaches and JPEGs Come to Bitcoin
Golden Cross Approaches
The golden cross is a commonly used technical indicator. It is characterized by the intersection of two moving averages, where a short-term average crosses above a long-term average. The most commonly used moving averages are the 50-day and 200-day. This crossover pattern is widely interpreted as a signal of a potential trend reversal from bearish to bullish, suggesting an upward momentum in the asset's price.
As demonstrated by the chart below, bitcoin’s 50-day SMA is rapidly approaching the 200-day and is likely to materialize next week, if not over the weekend. This technical indicator may trigger the entrance of momentum traders into the fold.
Bitcoin has experienced 8 golden crosses since its inception. We will dig into the numbers below, but visually we can ascertain that most instances of a golden cross have preceded favorable returns across most timeframes. Most occurred at critical long-term inflection points, and only one of these instances would be considered a bearish countersignal.
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