Bullish Golden Crosses on Crypto, a Rarity Since the January 2018 Correction
Many cryptos including BTC formed or are starting to form “golden crosses” on the popular 12 day and 26 day EMAs on daily candles.
You can see a visual of what I mean here, or you can see what I mean on the charts below. The first chart shows a true golden cross forming on Bitcoin (a true golden cross is when the 50 day Simple Moving Average or SMA crosses above the 200 day Simple Moving Average), the second chart shows an example of the 12 day Exponential Moving Average or EMA crossing over the 26 (a type of bullish cross I call a “golden cross” on this page), the third chart shows some price action from April 2018 which illustrates 12 and 26 crosses on different time frames.
UPDATE 2019 and Explanations of Golden Crosses and Bullish Crosses: I added the above paragraph and the three charts below in April 2019 to make the page more informative in terms of explaining what a true golden cross is and illustrating what I mean when I discuss the bullish 12 and 26 EMA crosses in crypto that I called “golden” (at the time I wrote this I was using loose words to make a point, but in retrospect I want to make sure people understand the correct usage of terms). Both types of crosses are bullish signs, but the true golden cross is a far more rare and bullish long term sign, while the 12 and 26 day is a solid medium term trend indicator. Also note you can apply moving averages to any candlestick length and discusses bullish and bearish crosses that way too.
Notice how the short term 12 day “Exponential Moving Average” or “EMA” is just starting to cross up over the 26 day EMA around April 19th – 20th 2018 on chunks of data that represent prices in a day, i.e. “daily candles?” You have to squint to see it, but it is there. That cross up is “a golden cross on the 12 and 26 day EMAs on daily candles.” This is a bullish sign that CAN (not DOES) signal the start of a continued upward trend!
This is particularly relevant and important because these are the only two indicators offered on the BTC/USD pair on GDAX (one of the most important trading pairs on one of the most important exchanges).
If you check out GDAX and look at the EMA and candles (toggle “line” to “candle” and check the 12 and 26 boxes under “overlay”), you can get a pretty clear sense of how relevant GDAX and those indicators are by noticing how the price action tends to follow those indicators on essentially all time scales.
Right now, at $8.5k, BTC/USD has just barely formed a golden cross, meanwhile Ether and many alts have already made headway beyond that point (for whatever reason BTC is behind the pack a bit in this attempt at a recovery phase).
With that covered, it is a little too early the celebrate. The reality is that this specific pattern has fully formed on BTC/USD a few other times since the fall from $20k back in December. Of those times, the other notable one was during the rally to $11.6k.
As you may be aware, the rally to $11.6k did not hold and in fact we went all the way down to $6.4k in a downward trend that started only a week or so after forming the golden cross!
Further, a few popular alts like Tron and Verge that broke out earlier than the rest (they were running when most coins were hitting their lows) ended up pulling back eventually after making some really great highs.
With those lasts point in mind, it should be clear that a single golden cross on a single pair of moving averages doesn’t tell us anything about the future for sure. Instead, it is just one positive sign we can look at to better understand if we are forming a new bullish trend or not.
Meanwhile, the same is true for bearish trends. The more bearish indicators that pop up, the more confident we can be that we are in a bear market with a downward trend.
Knowing what kind of market we are in is important, because it is a heck of a lot safer to HODL and buy the dips in a bull market than it is in a bear market. Likewise, it is generally ideal to buy at or close to the end of a bear market and sell at or close the end of a bull market (no one can see the future, but the sooner we can spot the trend forming, the better).
A while back you may have heard that a death cross that was forming in BTC/USD (here is a visual). That “death cross” was on the 50 EMA and 200 day EMA (or you could argue on the 50 and 200 day SMA or “simple moving average;” EMA and SMA are just different ways to calculate moving averages).
That death cross was a bearish sign, and as you can see on the chart things got a little dicy for a minute but actually ended up turning around quickly and making an upward trend (despite the short term 50 still being under the 200 as I write this).
Again, the fact that the trend reversed shortly after that death cross should clue you in to how predictive a single indicator is in practice when it comes to price trends!
The 50, 200 and the 12, 26 are just two of many examples of important moving averages that can give us clues as to the direction of crypto prices. The more golden crosses we see on the more time frames (especially longer time frames), the more bullish the crypto chart.
For the last three months many short term averages have been below long term averages or converging towards them on larger time frames, now since the $6ks, the opposite is starting to happen.
In simple terms, this is a good sign that could signal the start of a new bullish trend. The longer the trend continues, and the more indicators like this pop up, the more confident we can be. The more confidence the crypto market inspires, the more sense it’ll make to buy and hold. The more sense it makes to buy and hold, and the higher prices go, the more likely it is that retail and institutional investors will join the fray and push the price even higher.
The set-up is nice, but we aren’t out of the woods yet.