Bitcoin Death Cross dont believe the hype

A lot of noise in the media this week about a “death cross” in Bitcoin. A “death cross” is a term used in technical analysis to describe when the 50 day moving average crosses below the 200 day moving average. In theory, its purpose is to signal a change in trend to the downside.

Crypto 2

A change in trend coming after Bitcoin has already fallen over 50% from its $64,895 high from April?

Feeling a little sceptical about the “death cross” I thought it would be interesting to look back at the success rate of past “death cross” sell signals in Bitcoin.

Learn more about trading Bitcoin here

For the back test a short Bitcoin trade was entered into on the first daily close after the 50 day ma crossed below the 200 day ma. The trade would be exited on the first daily close after the 50 day moving average crossed back above the 200 day ma.

With limited data history, it would be fair to say that the sample size I collated below is less than required to come up with a robust conclusion. Nevertheless, after rounding trade entries and exits to the nearest dollar this is what I found.

Trade 1. Short Bitcoin 9th April 2014 at 442. Exited 12th July 2014 at 638 = -$196.00

Trade 2. Short Bitcoin 4th September 2014 at 487. Exited 15th of July 2015 at 286 = +$201.00

Trade 3. Short Bitcoin 15th of September 2015 at 230. Exited 28th of October 2015 at 305 = -$75.00

Trade 4. Short Bitcoin 31st of March 2018 at 6928. Exited 23rd of April 2019 at 5531= +$1397.00

Trade 5. Short Bitcoin 26th of October 2019 at 9253. Exited 18th of February 2020 at 10185 = -$932.00

Trade 6. Short Bitcoin 25th of March 2020 at 6692. Exited 21st of May 2020 at 9516 = -$2824.00

As viewed above, my scepticism towards the “death cross” sell signal was well-founded. Of the six “death cross” trades since 2012, there were four losing trades amounting to a loss of -$2429.00.

If truth be told, after Bitcoin (and Ethereum) made new lows (Wave v) overnight before a recovery into the close, it has provided the setup for a potential recovery in Bitcoin.

Supported by bullish divergence on the RSI, I will adopt a more positive view of Bitcoin upon upside follow through and a daily close above $34,000 in today's session, leaning against the overnight low at $28,600. The initial upside target is resistance near $42,000.

Bitcoin Death Cross dont believe the hype

Source Tradingview. The figures stated areas of the 23rd of June 2021. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

More from Bitcoin USD

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account