The recent trend of Bitcoin has attracted the attention of technical analysis enthusiasts: Its price chart shows that the short-term moving average (MA) crosses the long-term moving average upward, forming the classic “Golden Cross” pattern. This technical signal is usually regarded as a potential omen of a bullish trend, but the actual market response requires a comprehensive analysis combining multiple factors.
What is the “golden cross”?
The “golden cross” is an important signal in technical analysis, formed when a short-term moving average (such as the 50-day MA) breaks through a longer-term moving average (such as the 200-day MA) from below. This pattern is regarded as a sign of the market’s shift from bear to bull, as the short-term average price exceeds the long-term average price, suggesting that the bulls are in the upper hand.
Take the current trend of Bitcoin as an example: As of May 20th, the 50-day moving average of BTC (approximately $28,000) has crossed above the 200-day moving average (approximately $26,000), forming a clear crossover pattern. This is the first time since October 2020 that Bitcoin has shown this signal. After the last signal appeared, the price of BTC rose by more than 300% in the following 12 months.
Historical performance and market expectations
From historical data, the “golden cross” has certain reference value for the medium and long-term trend of BTC:
It is worth noting that a pullback occurred after the “golden cross” in 2019, indicating that this signal is not absolutely reliable. Analysts point out that the validity of historical laws needs to be combined with factors such as market cycles and macroeconomic environments:
Cycle characteristics of 2024-2025: Currently, it is in the upward phase following the Bitcoin halving cycle (the halving will be completed in April 2024). Historical data shows that 12 to 18 months after the halving is usually the peak period of a bull market.
Macroeconomic variables: Factors such as the Federal Reserve’s monetary policy, the trend of the US dollar index, and institutional capital inflows (such as BlackRock Bitcoin ETF applications) may amplify or offset the impact of technical signals.
Limitations of Technical Analysis and Risk Warnings
Although the “golden cross” triggers bullish sentiment, investors need to be vigilant against the inherent flaws of technical analysis:
Lag: Moving averages are calculated based on historical prices. By the time the signal appears, the market may have partially digested expectations.
Market manipulation is possible: The liquidity in the Bitcoin market is concentrated, and large traders may create technical signals by pulling up the market to induce retail investors to follow suit.
Macro event shocks: Black swan events such as geopolitical conflicts and sudden changes in regulatory policies (such as the new ban on cryptocurrencies by the US SEC) may completely reverse the trend.
Morgan Stanley’s latest report indicates that the current risk premium index of Bitcoin (a measure of market panic) has risen to 65%, approaching the level before the 2022 crash, suggesting an intensification of short-term volatility risks.
The response strategies of institutions and retail investors
Facing the game between technical signals and market reality, different investor groups present differentiated strategies:
Institutional investors: Asset management institutions such as Bridgewater Associates are increasing their Bitcoin allocation. Their strategies rely more on fundamental analysis (such as hash rate growth and on-chain activity) rather than a single technical indicator.
Retail traders: Some short-term investors enter the market based on the “golden cross”, but they need to set strict stop-losses (such as exiting when the 200-day MA is broken) to avoid being trapped when chasing high prices.
Long-term holders (HODLers) : Data from blockchain analytics firm Glassnode shows that the number of Bitcoin addresses held for over a year has reached a record high, indicating the endorsement of the “golden cross” by long-term investors.
Conclusion: Signal vs. Reality
The “golden cross” adds an optimistic footnote to the Bitcoin market, but its true value depends on whether the market can form sustained buying. As cryptocurrency analyst PlanB put it on Twitter: “Technical indicators are maps, not steering wheels – it is always the flow of funds and market sentiment that determine the trend.”
For ordinary investors, while paying attention to technical signals, they also need to examine their own risk tolerance: The high volatility of Bitcoin means that even if the medium and long-term trend is upward, the short-term correction range may still reach 30% to 50%. Rational allocation and risk diversification might be more important than chasing a single technical signal.
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