Shaurya Malwa · 9 hours ago · 2 min read
Bitcoin › Analysis
This weird Bitcoin pattern suggests Wednesday’s 10% dump may precede a massive surge
Over the past few days, all anyone could talk about on Crypto Twitter was the golden cross that had formed on Bitcoin’s one-day chart.
For those unaware, a traditional golden cross in technical analysis is when an asset’s 50-day simple moving average crosses above its 200-day moving average, suggesting that a decisive bull trend is forming. As Investopedia further explains on the subject matter:
“As long-term indicators carry more weight, the golden cross indicates a bull market on the horizon and is reinforced by high trading volumes. […] It is interpreted by analysts and traders as signaling a definitive upward turn in a market.”
So, unsurprisingly, when Bitcoin formed this auspicious sign at the start of the week, cryptocurrency investors across the board were over the moon, claiming that the next parabolic bull run that will take BTC to $100,000 and beyond was starting then and there.
Though this was quickly proven not to be the case. On Feb. 19, the cryptocurrency cratered from the $10,300 daily high to as low as $9,250 on some exchanges — a drop of just around 10 percent — in a matter of a few hours, liquidating hundreds of millions of dollars worth of leverage positions.
Despite this brutal crash that undoubtedly caught traders with their pants down, Bitcoin’s strong correction may actually be par for the course in a wider uptrend.
Bitcoin could be on verge of strong bull run, despite 10% crash
As aforementioned, Bitcoin, from its peak on Feb. 19, dropped just around 10 percent. This, of course, was shocking; the golden cross that formed just a day or two earlier was a sign to many investors that the days of BTC dropping hundreds of dollars in a day were long over.
The thing is, the leading cryptocurrency just this week exhibited almost the exact same trend the last time a golden cross was registered:
As this writer explained in the tweet below, in the 48 hours after Bitcoin’s golden cross in April 2019, the price of the asset plunged by $641, marking an 11.41 percent move lower, before starting to trend higher in the weeks after the post-cross correction. In fact, in the two months after the golden cross and the subsequent plunge formed, BTC surged 180 percent to a level just short of $14,000.
Fun fact: Bitcoin dumped 11% in the two days after the last golden cross in April 2019, then proceeded to rally ~170% to $14,000. pic.twitter.com/i3XYS5XNII
— Nick Chong (@_Nick_Chong) February 20, 2020
This writer wasn’t the only one who noticed this peculiar trend of Bitcoin temporarily moving against its crosses prior to moving in the trajectory the cross suggests.
Alex Krüger, a macroeconomist and cryptocurrency market commentator, noted in his own tweet that Bitcoin’s printing of a death cross (the opposite of a bull cross) preceded the 42 percent “China pump” that took BTC across $10,000 for the first time after weeks of a bear trend. What followed this was a 50 percent retracement from prices above $9,000 to $6,400 in the months that followed.
These two cases suggest that Bitcoin, after finishing its correction over the next day or two, will form a new uptrend that will take it past the previous local top at $10,550, likely to start a longer-term bull market.
Golden cross sets a good tone for the market
Indeed, golden crosses have historically preceded the cryptocurrency’s biggest uptrends higher. More specifically, data this writer compiled shows that the golden cross in 2012 led to a 20,578 percent surge in the price of Bitcoin and that a golden cross in 2015 led to the 6,739 percent rally that took BTC to just shy of $20,000.
Yes, there were two cases where the golden cross actually preceded macro declines of 65 percent and -32 percent, though that was when the 200-day moving average was rolling over, not starting to trend higher as it has over the past few weeks.