Bitcoin is close to a ‘Golden Cross’ on the weekly chart
Analysts see the golden cross as a bullish signal, even though it can’t be used as a reliable trading sign.
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Bitcoin is nearly performing a ‘golden cross’ on the weekly chart. This signal occurs when the simple moving average (SMA) of the last 50 weeks crosses above the 200-week SMA in an ascending manner. A golden cross is commonly received as a positive sign by analysts.
However, the objective of the golden cross is to serve as something other than a trading sign, says Henrique Paiva, an investment analyst at Cripto Select. This signal is relevant because it indicates a potential trend reversal and reflects the strength of price movement.
The analyst highlights that there is a distinction between a ‘true golden cross’ and a simple golden cross. A true golden cross is similar to a simple one, with the key difference being the requirement for upward movement in both moving averages.
“Moving averages are known as lagged indicators and waiting for a crossing is a way to patiently wait for the confirmation of a new trend, eliminating exposure to market noise,” explains Paiva.
Since 2011, ten golden cross events have been registered on Bitcoin’s daily charts, and two of them happened this year. Paiva says that both golden crosses shown in 2023 presented profits for traders within six months.
“Even knowing that eight events don’t have statistical relevance, this information points to an optimistic look at this indicator. Also, for the past 13 years, even without using the golden cross as a signal, Bitcoin has shown a positive yearly close in 10 of these years. It gets clear that the golden cross isn’t relevant as a trading sign, but it can still be used as a trend filter for other setups and trading models,” concludes Paiva.
In the past eight events of this kind, Bitcoin has shown a record of price growth within 6 to 12 months in five of them. On two golden cross signals, the biggest crypto by market cap took more than 12 months to get a price leap, and just one occurrence resulted in no price rise within 24 months.