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The 50-week simple moving average (SMA) of Bitcoin's price has achieved a historic milestone by crossing above the 200-week SMA for the first time on record. Market enthusiasts label this occurrence as a "golden cross," signaling a positive shift in asset prices. This noteworthy marker now prominently appears on the weekly price chart of Bitcoin (BTC).
The term "golden cross" is rooted in technical analysis and denotes a favorable market condition where the short-duration SMA surpasses the long-duration SMA. The concept, along with its counterpart, "the death cross" (where the short-duration SMA falls below the long-duration SMA), originates in Japan, according to certain technical analysis textbooks.
Challenges and Considerations for Traders
Many traders view crossovers as forward-looking indicators, with the golden cross specifically indicating the potential for a long-term bull market.
According to Coin Desk, seasoned traders exercise caution, recognizing that averages, including SMAs, are based on historical data and tend to lag behind current prices. The recent golden cross on Bitcoin's weekly chart follows a significant rally of over 70%, propelling the cryptocurrency to $42,700 within a span of four months.
Despite the bullish interpretation associated with crossovers, some traders perceive them as lagging indicators that may coincide with trend exhaustion. For example, the confirmation of a weekly death cross in early 2023 marked the bottom of the bear market. Bitcoin's daily chart has demonstrated a mixed record in predicting bullish and bearish trends through golden and death crossovers.
According to Coin Pedia, Bitcoin's recent rally has slowed, with the cryptocurrency trading 10% lower than its highs, approaching $49,000. This peak followed the initiation of trading for 11 spot exchange-traded funds (ETFs) in the U.S. last Thursday.
Sustaining Bullish Momentum
Observers attribute the subsiding bullish momentum to early ETF flows that failed to meet the lofty market expectations.
Greg Cipolaro, the global head of research at NYDIG, remarked in a newsletter on Tuesday that while the net flow of funds for the ETFs reached $965 million, including seed funds, the spot price experienced a decline from the launch-induced excitement as investors grappled with expectations that were perceived as unreasonably high.
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