In gentle of the latest rally that has seen it surge greater than 40% for the reason that begin of the 12 months, Bitcoin is about to expertise solely its seventh so-called “golden cross” within the final 10 years. A golden cross is a technical occasion the place the 50-Day Easy Transferring Common (SMA) crosses to the north of the 200-Day SMA. Some technicians and merchants interpret a golden cross as both a purchase sign, or at the very least an indication that worth momentum has shifted in a bullish route.
Assuming there isn’t a sudden and lasting greater than 30% collapse within the worth of Bitcoin, the world’s largest cryptocurrency by market capitalization and the primary profitable implementation of cryptographically secured blockchain know-how, Bitcoin’s 50-Day SMA ought to transfer above its 200-Day SMA in round one week.
How Has Bitcoin Carried out After Golden Cross Occasions?
Should you have been to have purchased Bitcoin on the time of every of the final seven golden cross occasions and held for 90 days, you’ll have been up in your funding 4 out of seven instances. The margin of those good points would have various wildly between 10-80%. One outing of seven, you’ll have been flat after 90 days, and on two events you’ll have been down (by 20% and 45%).
Should you have been to have held for 12 months, you’ll have been up 5 out of seven instances. Once more, the magnitude of good points over this time interval varies wildly from 25% to 400%. The 2 events while you would have been down after 12 months coincided with the brutal bear markets of 2014 to early 2015 and of late 2021 into late 2022.
Should you tweak the purchase sign and say that you simply solely purchase when a golden cross occurs on the finish of a chronic bear market (not throughout a uneven bull market), the outcomes are somewhat totally different and arguably extra bullish. Should you purchased and held for 12 months after the July 2015, October 2015 and April 2019 golden cross occasions, you’ll have returned a respective (roughly) 130, 120 and 25%.
As in these aforementioned events, the 50-Day SMA has now been beneath the 200-Day SMA for a chronic time frame. Think about that Bitcoin continues to commerce round $23,000-$24,000 on the time of the approaching golden cross. A 100% acquire within the subsequent 12 months is possible given previous efficiency. So we may feasibly be speaking about Bitcoin hitting the mid-$40,000s in early 2024.
Is the Bitcoin Bear Market Over?
Such a restoration in Bitcoin’s worth over the subsequent 12 months is straightforward to think about when you think about these components.
Firstly, 2023 is more likely to be a 12 months of easing monetary circumstances (which is often crypto-bullish) than of tightening monetary circumstances (like 2022 was). That’s as a result of inflation appears to be quickly falling, as acknowledged by the Fed this week, the Fed is approaching the tip of its tightening cycle and will even be chopping charges by the tip of the 12 months to help a US financial system that might quickly fall into recession.
Furthermore, Bitcoin’s bear markets traditionally solely final round a 12 months and a number of on-chain and technical indicators at the moment are flashing that the underside of the 2022 bear market is in (as mentioned on this recent article).
All of the whereas, long-term traits in Bitcoin’s wider adoption (i.e. customers and buyers) stay optimistic, and the asset ought to quickly acquire better legitimacy as regulators in key markets (just like the US, UK and EU) work to usher in complete crypto market laws. One other golden cross thus provides to an inventory of arguments as to why the Bitcoin bear market is over.