At times of upward momentum in the market, technical analysts often share their predictions about the Golden Cross, suggesting the trend will continue. For investors and Bitcoin holders who don’t have any idea of what it means, excitement around the topic can be confusing.
We’ve prepared this article so that you’ll know what the Golden Cross means the next time you come across it. And if you already know, still keep up with us to read about previous Golden Cross events and how to use the indicator in your trading strategy.
Next, we’ll cover:
Related: Fundamental vs. Technical Analysis
In charts, the Golden Cross forms a pattern signaling a possible start of a golden or bullish run for investors.
But to get to it, there’s another indicator to know about: the Moving Average (MA).
In volatile markets, moving averages help filter out noise or short-term price swings to figure out the bigger picture of the market direction for a certain period of time. A moving average can show how the price of a stock, cryptocurrency, or fiat currency is changing on average over time frames like 10, 50, or 200 days.
This method of calculating average price movement over a specific period is called the Simple Moving Average (SMA). There are also more complex versions that give more weight to recent prices or adjust to market conditions.
Knowing how much prices have changed on average may help traders spot trends and analyze market movements to have a clearer view of past performance.
What does the Golden Cross have to do with it?
Well, the Golden Cross is based on Simple Moving Averages.
Assets make a Golden Cross when the 50-day moving average, also called the fast-moving average, goes above the 200-day moving average, the slow-moving average.
This means that the average price over the last 50 days is higher than the average price over the last 200 days, indicating prolonged upward momentum. Though this may not always happen, the Golden Cross is a milestone that many technical analysts consider.
Here’s how the Golden Cross looks on a chart:
The Golden Cross is a popular indicator for buy-and-hold traders, who are known as HODLers in the crypto community. Strategies that involve tracking the Golden Cross can vary, but they have in common the need to wait for proper market conditions and avoid rushing to buy and sell based on short-term fluctuations.
Besides HODLing, another popular strategy is moving average pullback.
The Golden Cross is not a guarantee that the price will continue to rise. When deciding on the best time to buy assets, a trader may wait for the price to pull back slightly after the Golden Cross is formed.
These are just a few trading methods, each of which may yield different results in different situations.
At the same time, traders can adapt the Golden Cross identification periods to use it in other strategies. For example, they can compare shorter-term moving averages for quicker decisions.
You can read more about crypto trading in our article “Basic crypto trading strategies.”
The Golden Cross pattern is formed through these three stages:
Since its launch in January 2009, Bitcoin is considered to have made six Golden Crosses between the 50-day and 200-day moving averages. The first Bitcoin Golden Cross was on February 9, 2012. Although the price fell by around 39% after a month, it was up by 306% in a 12-month timeframe.
The next Golden Cross events happened on October 27, 2015; April 23, 2019; May 21, 2022; September 15, 2021; and February 7, 2023. In each of these cases, the trend reversed, forming a low point on the charts before it went up and gained strength.
Then, a bull run followed the breakout.
Next, we’ll cover:
- What is the Bitcoin Golden Cross and how is it identified?
- In which trading strategies is the Golden Cross used?
- How can the Golden Cross impact market prices?
- Will Bitcoin make a new Golden Cross in 2024?
- What is the Death Cross, the opposite signal?
- Should you rely on the Golden Cross?
What Is the Bitcoin Golden Cross and How Is It Identified?
The Golden Cross is a bullish sign in crypto, stocks, and other financial markets. It’s a rare and positive indicator that is formed when an asset starts to recover after a downtrend. On average, achieving a Golden Cross can take weeks or months based on the recovery pace of an asset and market volatility. At the same time, the signal needs to hold strong. Otherwise, if it appears for a moment on a M5 chart, it can be a false indicator.
In charts, the Golden Cross forms a pattern signaling a possible start of a golden or bullish run for investors.
But to get to it, there’s another indicator to know about: the Moving Average (MA).
In volatile markets, moving averages help filter out noise or short-term price swings to figure out the bigger picture of the market direction for a certain period of time. A moving average can show how the price of a stock, cryptocurrency, or fiat currency is changing on average over time frames like 10, 50, or 200 days.
This method of calculating average price movement over a specific period is called the Simple Moving Average (SMA). There are also more complex versions that give more weight to recent prices or adjust to market conditions.
Knowing how much prices have changed on average may help traders spot trends and analyze market movements to have a clearer view of past performance.
What does the Golden Cross have to do with it?
Well, the Golden Cross is based on Simple Moving Averages.
Assets make a Golden Cross when the 50-day moving average, also called the fast-moving average, goes above the 200-day moving average, the slow-moving average.
This means that the average price over the last 50 days is higher than the average price over the last 200 days, indicating prolonged upward momentum. Though this may not always happen, the Golden Cross is a milestone that many technical analysts consider.
Here’s how the Golden Cross looks on a chart:
How Golden Cross looks on chart: Source: Investopedia
Which Trading Strategies Is the Golden Cross Typically Used?
As the Golden Cross relies on price changes over a period of time, it is mainly used by long-term investors rather than day traders. Therefore, identifying and using the signal in trading requires patience.
The Golden Cross is a popular indicator for buy-and-hold traders, who are known as HODLers in the crypto community. Strategies that involve tracking the Golden Cross can vary, but they have in common the need to wait for proper market conditions and avoid rushing to buy and sell based on short-term fluctuations.
Besides HODLing, another popular strategy is moving average pullback.
The Golden Cross is not a guarantee that the price will continue to rise. When deciding on the best time to buy assets, a trader may wait for the price to pull back slightly after the Golden Cross is formed.
These are just a few trading methods, each of which may yield different results in different situations.
At the same time, traders can adapt the Golden Cross identification periods to use it in other strategies. For example, they can compare shorter-term moving averages for quicker decisions.
You can read more about crypto trading in our article “Basic crypto trading strategies.”
Times When Bitcoin Hit the Golden Cross and How It Impacted the Prices
Before talking about the times BTC reached the Golden Cross, we need to mention the stages of the sign’s formation. This is important to determine if the mark has a strong basis or can give a false signal.
The Golden Cross pattern is formed through these three stages:
- Stage 1: Price Downtrend: Typically, before making a Golden Cross, the price of an asset moves down. You’ll spot this as red candles on price charts.
- Stage 2: The Actual Crossover: This happens when an increase replaces the downtrend and the 50-day moving average surpasses the 200-day moving average.
- Stage 3: Validation: For a Golden Cross to be confirmed, the upward trend needs to find support from other bullish indicators, like high trading volume. Otherwise, the signal may have been false. False signals occurred on July 11, 2014, July 15, 2015, and February 19, 2020, when Golden Crosses were invalidated within three months due to large downtrends.
Since its launch in January 2009, Bitcoin is considered to have made six Golden Crosses between the 50-day and 200-day moving averages. The first Bitcoin Golden Cross was on February 9, 2012. Although the price fell by around 39% after a month, it was up by 306% in a 12-month timeframe.
The next Golden Cross events happened on October 27, 2015; April 23, 2019; May 21, 2022; September 15, 2021; and February 7, 2023. In each of these cases, the trend reversed, forming a low point on the charts before it went up and gained strength.
Then, a bull run followed the breakout.
In early January 2024, Bitcoin made its first WEEKLY Golden Cross, which means the 50-week moving average crossed over the 200-week moving average. Later, on March 14, 2024, the coin reached its all-time high so far, trading at around $73,750 according to CoinMarketCap.
The coin started the month below $63,000, fell to around $59,000 on October 10, and then began an upward trend. Since then, Bitcoin has been on the rise. This bullish momentum suggests that a Golden Cross may be around the corner.
On October 18, 2024, Bitcoin formed an Ichimoku Golden Cross, a bullish indicator in Japanese technical analysis. Ichimoku is an advanced method that uses the components Tenkan-sen and Kijun-sen, which, like moving averages, are related to each other.
Tenkan-sen, the conversion line, is a shorter-term indicator showing the midpoint of the highest high and lowest low over the past 9 days. Kijun-sen, which translates as the baseline, calculates the highest highs and lowest lows over the past 26 days.
The Ichimoku Golden Cross occurs when the Tenkan-sen crosses above the Kijun-sen, indicating a potential upward trend.
Based on the ongoing momentum, crypto analysts suggest that the next step could be the Golden Cross between the 50-day and 200-day moving averages.
Will Bitcoin Make Another Golden Cross in 2024?
October 2024 seems to be a real "Uptober" for Bitcoin and other cryptocurrencies so far. At the time of writing (the middle of the month), Bitcoin trades above $66,000.
The coin started the month below $63,000, fell to around $59,000 on October 10, and then began an upward trend. Since then, Bitcoin has been on the rise. This bullish momentum suggests that a Golden Cross may be around the corner.
On October 18, 2024, Bitcoin formed an Ichimoku Golden Cross, a bullish indicator in Japanese technical analysis. Ichimoku is an advanced method that uses the components Tenkan-sen and Kijun-sen, which, like moving averages, are related to each other.
Tenkan-sen, the conversion line, is a shorter-term indicator showing the midpoint of the highest high and lowest low over the past 9 days. Kijun-sen, which translates as the baseline, calculates the highest highs and lowest lows over the past 26 days.
The Ichimoku Golden Cross occurs when the Tenkan-sen crosses above the Kijun-sen, indicating a potential upward trend.
Based on the ongoing momentum, crypto analysts suggest that the next step could be the Golden Cross between the 50-day and 200-day moving averages.
What Is the Death Cross, the Opposite of the Golden Cross?
The spooky name of this indicator speaks for itself: the Bitcoin Death Cross suggests a bear market. Like the Golden Cross, it typically involves the 50-day and 200-day moving averages.
The Death Cross is spotted when the short-term average falls below the long-term average and is often viewed as a signal that the price of Bitcoin and other cryptocurrencies may continue to decline. This can trigger fear and uncertainty among traders, leading to panic selling and further downward pressure on prices.
The graphic displays how the Golden Cross starts and the Death Cross changes starting a bull or a bear market. Source: OfficialCryptoTraders on TradingView
Historically, Bitcoin Death Crosses have caused major price declines.
Bitcoin has experienced the Death Cross several times in its history. Among the largest ones were those in 2015 and two Death Crosses in 2021: one in January and another in June.
After the Death Cross in 2015, Bitcoin's price fell from about $450 to around $200 over the next several months.
In January 2021, Bitcoin's price had already declined significantly from its all-time high of nearly $42,000. After the Death Cross, Bitcoin saw further downward pressure, dipping to around $30,000 before staging a recovery.
The second Death Cross in 2021 happened when Bitcoin was trading at around $35,000 in June. Following this event, the price dropped to approximately $28,000 within a month. Interestingly, this marked a local bottom before Bitcoin began to rise.
Golden Crosses and Death Crosses often follow each other in the market, bringing a switch between bearish and bullish trends. For example, Bitcoin experienced a Golden Cross in early 2021, which was followed by a Death Cross later that year in June. Similarly, in 2023, February’s Golden Cross came after January’s Death Cross.
Analyzing these changes helps traders understand how historical prices have shifted, but it’s not a guarantee for future predictions.
What Is the Bitcoin NVT Golden Cross?
Death Crosses and market drops have often been periods when there are talks about Bitcoin being dead or in a bubble. This was especially true in the early days of the coin.
Bitcoin chart analyst Willy Woo introduced the NVT (Network Value to Transactions) in 2017 to prove the asset was not in a bubble.
NVT is similar to the price-to-earnings (PE) ratio in the stock market, comparing a company's current market price per share to its earnings per share.
To calculate the NVT, you need to divide the Network Value (market cap) by the USD volume transmitted through the blockchain daily. A high NVT means the overall market value of a cryptocurrency (like Bitcoin) is much higher than the actual amount of transactions taking place within its network.
This can suggest that the cryptocurrency is being valued more based on speculation or investor sentiment rather than its real-world utility or usage in transactions. On the other hand, a low indicator suggests the market cap is low compared to the transfer volume, indicating that the cryptocurrency’s price could have room for growth.
The NVT Golden Cross is a variation of the traditional Golden Cross. It happens when a shorter-term NVT moving average crosses below a longer-term NVT moving average. This can signal a bullish trend, indicating that the market value of a cryptocurrency is becoming more aligned with its transaction volume, suggesting healthy demand and usage.
Yes, there have been times when a bullish run started after the event, but there have also been periods of decline. Even if we anticipate an upcoming Golden Cross, no one can say for sure whether Bitcoin will maintain its level or experience a pullback.
That said, the Golden Cross is an important indicator used for momentum trading and price analysis. Combined with other technical tools, news monitoring, and macro trends analysis, traders can make more informed decisions.
However, how you interpret market signals is crucial. It may not always be the best decision to buy Bitcoin when it hits the Golden Cross, anticipating a rise, or to sell after a Death Cross, expecting a drop.
Although this basic strategy may work, it’s better to be aware of false signals and unexpected changes to manage your risks.
At the end, please note that this article is for informational purposes only, and you should do your own research to understand the market better.
The NVT Golden Cross is a variation of the traditional Golden Cross. It happens when a shorter-term NVT moving average crosses below a longer-term NVT moving average. This can signal a bullish trend, indicating that the market value of a cryptocurrency is becoming more aligned with its transaction volume, suggesting healthy demand and usage.
Should You Make Investment Decisions Based on the Bitcoin Golden Cross
Relying too much on a market signal can be an easy trap for investors. There are no fixed rules on how the market will behave in certain situations, and achieving a Golden Cross is no exception.
Yes, there have been times when a bullish run started after the event, but there have also been periods of decline. Even if we anticipate an upcoming Golden Cross, no one can say for sure whether Bitcoin will maintain its level or experience a pullback.
That said, the Golden Cross is an important indicator used for momentum trading and price analysis. Combined with other technical tools, news monitoring, and macro trends analysis, traders can make more informed decisions.
However, how you interpret market signals is crucial. It may not always be the best decision to buy Bitcoin when it hits the Golden Cross, anticipating a rise, or to sell after a Death Cross, expecting a drop.
Although this basic strategy may work, it’s better to be aware of false signals and unexpected changes to manage your risks.
At the end, please note that this article is for informational purposes only, and you should do your own research to understand the market better.
FAQ
- Where Is the Golden Cross Used?
- How May the Bitcoin Golden Cross Affect the Overall Crypto Market?
- Are There Other Positive Market Indicators Besides the Golden Cross?
- Does Bitcoin Always Rise After a Golden Cross Happens?
Anahit Avetisyan
Author
Web3 writer and crypto HODLer with a keen interest in market trends and recent technologies.
