Bitcoin “Death Cross” - don’t 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.

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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.

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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

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