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Bitcoin Moving Average Show Bull Markets In The Making

A useful tool to take out volatility and study what's really going on with BTC.

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Bitcoin’s (BTC) 200-day moving average (DMA) continues to slide in the longest downward trend since the summer of 2014.

Price data collected over the last 200-days indicates the Bitcoin moving average fell from $10,300 in early June to today’s $8,300. Although still $2,000 higher than the $6,150 moving average at the start of 2018, this is the first declining trend for the 200-DMA in three years. The last slide saw the average decline from $650 in June 2014, to $250 in July 2015.

Traders use DMAs to determine an asset’s price-trend overtime and to identify changes to the established trend. They are calculated by dividing the sum total of past closing prices – within a certain timeframe – over the number of days. A rising DMA indicates an asset is an uptrend, with a declining DMA showing a downtrend.

The number of days included in a DMA depends on what it is being used for. Longer averages like a 200-DMA are useful for ‘hodlers’; traders with short-term positions benefit more from a 20-day or 50-day moving average.

Although based on past trends they can predict imminent future market trends. Traders watch for ‘golden-crosses’ when a 50-day DMA crosses over a 200-DMA, which is a bullish signal for the market; they also watch for ‘death-crosses’, when the 50-day average goes below that of the 200-DMA.

Moving averages help filter out noise from unexpected or sudden price spikes; longer DMAs having smoother curves.  For a volatile asset like cryptocurrency, denounced in a recent UBS report as ‘unstable’, this is particularly useful. Shot sharp drops in the BTC-price, like following the SEC’s rejection of the Winklevoss’ Bitcoin ETF, would not greatly affect the trend shown by a longer-term bitcoin moving average.

As the graph below shows, Bitcoin hit a death cross back at the end of March this year. Since then, the gap between the 50 and 200-DMAs has decreased; with the recent BTC-price hike pulling them close together.

 

Bitcoin Moving Average by Trading View

(Graph by Trading View)

 

Intercontinental Exchange, which owns the New York Stock Exchange, announced on Friday it was launching a new US-regulated BTC market in November.  Called Bakkt; it has the backing of Microsoft and Starbucks.

The DMA graph shows July’s bullish news over Bitcoin ETFs and greater institutional involvement helped to make that more of a possibility.  August has so far been a disappointing month for the BTC price. Breaking past $8,000 early last week, bitcoin has just managed to hold itself above the $7,000 mark.

 

The author is invested in BTC, which is mentioned in this article. 

 

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