Bitcoin Price Struggles to Hold Above $25,000 as Death Cross Looms
Bitcoin price is currently fighting to maintain its position above $25,000 per coin, aiming to establish a higher low compared to the June 2023 local bottom at $24,775. However, regardless of whether it succeeds, a death cross on the daily chart is almost certain to trigger, potentially with tonight’s daily close.
The term “death cross” may sound ominous, and it is not a positive sign for the cryptocurrency market. Let’s delve into the actual data behind this bearish crossover signal.
Betting on the Bearish Bitcoin Death Cross
BTCUSD is on the verge of triggering a death cross on the daily chart, marking the first bearish crossover of 2023 between the 50-day and 200-day moving averages. It is worth noting that these moving averages formed the opposite golden cross back in February of this year.
The significance of this signal cannot be underestimated. Moving average crossover signals are highly effective trading systems and fall under the broader category of trend-following tools. The last time this signal appeared, Bitcoin experienced a 65% decline. In contrast, a golden cross would have closed out the sell signal, resulting in only a 15% downside return.
Historical Performance of Trend-Following Trading Systems
Looking at historical data using TradingView, trading BTCUSD solely based on golden crosses to buy and death crosses to sell resulted in a 41% success rate. In other words, more than half of the trades were losing trades. However, this is where trend-following tools demonstrate their effectiveness. Despite the majority of trades being losers, the winning trades yielded an average return on investment (ROI) of 585%.
The Imminent Death Cross
The impending death cross suggests a higher probability of a new downtrend forming. If Bitcoin can achieve a golden cross in the days, weeks, or months following this death cross, we can attribute the signal to natural market fluctuations as BTCUSD establishes a solid bottom. However, if this does not occur, it could be an early warning that the bearish trend is gaining momentum.
Alternative Bitcoin Charts
It is worth considering other institution-related Bitcoin charts to determine whether the death cross is genuine. In Issue #20 of CoinChartist VIP: Flirting with Death, a chart compares the BTCUSD spot death cross with the proximity of the signal in BTC CME Futures and Grayscale Bitcoin Trust (GBTC). Interestingly, the 50-day and 200-day moving averages in one of the two charts show much more bullish price action, suggesting that the death cross may not be as significant as it appears.
Sources:
– TradingView: BTCUSD on TradingView.com
– CoinChartist VIP: Flirting with Death
Disclaimer: The chart and data mentioned in this article originally appeared in Issue #20 of CoinChartist VIP. Subscribe for free.
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About the author - J-S Tremblay
I've been involved in the cryptocurrency world since 2016 and trading since 2019. I started Moon and Lambo in 2021. I'm passionate about crypto and love to share my knowledge. I hate bankers and I hope that cryptocurrency will change the financial world for the better. View full profile...
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