In light of the recent rally, which has seen it rise by over 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 action has shifted in the bullish direction.
Assuming that there is a sudden and permanent fall in the price of not more than 30% BitcoinThe world’s largest cryptocurrency by market capitalization and the first successful implementation of cryptographically secure blockchain technology, bitcoin’s 50-day SMA should move above its 200-day SMA in about a week.
How Has Bitcoin Performed After the Golden Cross Events?
if you had bought Bitcoin At the time of each of the last seven golden cross events and held for 90 days, you would have been on your investment four out of seven times. The margin of these profits would have varied wildly between 10-80%. One time out of seven, you’re flat after 90 days, and on two occasions you’re down (20% and 45%).
If you had to hold out for 365 days, you would get up five times out of seven. Again, the magnitude of gains varied wildly from 25% to 400% over this time period. The two occasions when you would have fallen are after 365 days, with the brutal bear markets of 2014 in early 2015 and late 2021 through late 2022.
If you change the buy signal and say that you only buy when there is a golden cross at the end of a long bear market (not during a choppy bull market), the result is slightly different and arguably more bullish. If you bought and held for 365 days after the July 2015, October 2015 and April 2019 golden cross events, you’d make (roughly) 130, 120 and 25% back, respectively.
Similar to these aforementioned events, the 50-day SMA has now stayed below the 200-day SMA for a long time. Imagine that bitcoin continues to trade around $23,000-$24,000 at the time of the upcoming golden cross. 100% return is possible in the next year considering the past performance. So we can probably talk about bitcoin reaching the mid-$40,000s in early 2024.
Is The Bitcoin Bear Market Over?
When you consider these factors it is easy to envision such a recovery in the price of bitcoin over the next year.
First, 2023 is more likely to be a year of easing financial conditions (which is generally crypto-bullish) than one of tightening financial conditions (like 2022 was). This is because inflation seems to be falling sharply accepted by the feds This week, the Fed is nearing the end of its tightening cycle and may even cut rates until the end of the year to support the US economy which could soon be in recession.
Furthermore, bitcoin’s bear markets historically only last around a year and many on-chain and technical indicators are now flashing that 2022 is the bottom of the bear market (as discussed in recent article,
All in all, the long-term trends in bitcoin’s wider adoption (i.e. users and investors) remain positive, and the asset should soon gain more legitimacy as regulators in major markets (such as the US, UK, and EU) work to bring the broader crypto market to market. work for. Legislation. Another golden cross thus adds to the list of arguments why the bitcoin bear market is over.
