This is inspired by TradingShot's recent post (love their analysis). They posted all the instances of the daily death cross in Bitcoin's price history. For those who aren't aware, the death cross occurs when the 50 day moving average crosses below the 200 day moving average. If Bitcoin doesn't move well above 50k in the short-term, it's likely the death cross will occur relatively soon. The name is scary, of course, but just as the media tends to put forth bearish articles when price is doing poorly (since more people engage with content that confirms their bias), the death cross can simply be something that tends to occur when price stagnates or moves lower for a little while. Essentially, it could be meaningless.
I'm convinced sentiment and psychology are a lot more important than indicators such as Moving Averages (especially on the daily timeframe ). When I first started writing analysis, I didn't even include MA's at all. I began including them because I eventually realized how trading bots and algorithms use them to their advantage. And they do seem to be useful on bigger timeframes, such as the weekly and monthly.
Anyway, I keep thinking about how everyone is using past Bitcoin price action to determine current probabilities....but there are signs Bitcoin is maturing as an asset. In this case, I look at other assets that have matured (or solidified) over time. Take Amazon stock, for example. Prior to 2010, AMZN had 6 death crosses on the daily chart . 2 of them resulted in bull traps, while the other 4 indicated immediate new lows.
1. 5th August, 1999 - close of $48.63. Price declined to $41 a few days later before the bull trap to second peak of dotcom boom at $113. Selling at that death cross, and you'd have to sit on your hands. 2. 15th March, 2000 - Decline from near $63.75 to $5.51 on 1st October, 2000 (over 90% drop). 3. 24th March, 2004 - took a year to decline from $39 to $31 (less than 25% drop). 4. 9th March 2006 - Decline from $35 - $26. 5. 28th February 2008 - Short-term decline from $67 - 60ish before a bull trap to $90 in August 2008. 6. 14th October 2008 - Decline from $55.86 to $34.68 in November 2008 (bottom of financial crisis).
Since then, there have been 7 more death crosses for AMZN . None of these produced any extensive bearish period. If you sold at 3 of those death crosses, there was no opportunity to buy lower afterwards. Even after the 4 that resulted in price declines, it would have been difficult to time the bottom, since ONLY ONE of them resulted in a decline of more than 10% (December 2018), making selling largely pointless.
1. 8th July, 2010 - The low had already been set a few days earlier. Closed at $116 and the golden cross occurred in September, when price was $150. Never saw such low prices again. 2. 29th December, 2010 - this death cross marked the exact low near $167. 3. 2nd May, 2004 - Close of $308. This is one case where price headed lower shortly thereafter, heading to the bottom of $284 a week later. 4. 28th March, 2016 - close near $580. Price was in an uptrend and continued afterwards. Golden cross three weeks later. 5. 12th December, 2018 - $1663 close, price dropped to a low of $1307 by Christmas Eve for the bottom of the tech capitulation. 6. 10th October 2019 - close at $1720. Golden cross in Feb. 2020, right before the COVID crash. AMZN dropped to $1626, so I suppose this one worked out as well, though the decline was less than $100. 7. 19th April 2021 - close at $3372, Golden cross just 10 days later, BULL TRAP to a low of $3127. Price is now almost back to what is was on the day of the recent death cross.
What does this all mean? It's possible that MA crosses don't matter so much on the daily timeframe once long-term confidence in an asset has been established, and particularly once institutions become involved. They may only indicate a temporary slowdown of momentum (or may simply be a result of momentum that has already slowed). Selling at death crosses in the first 10 years of Amazon would have given some pretty great swing trading opportunities, but this changed significantly in the next decade, as Amazon established itself as the behemoth it is today. This is likely because when it was a young asset there was a lot more uncertainty. Buying the dip wasn't necessarily a "given." Will that change with Bitcoin? We'll see.
Now let's look at Bitcoin Death Crosses 1. 27th December, 2011 - Close at $4.80, decline to $2. 01 in November. 2. 9th April, 2014 - close near $440, declined to near $346 over the next two days. Then price rebounded above $600 over the summer (this was a bull trap). 3. 5th September, 2014 - $480.52 close, eventual decline to $163.88 (bear market bottom on 14th Jan. 2015). 4. 14th September, 2015 - close near $230. Price briefly dropped a few dollars lower over the coming days but basically moved up from there. Good place to buy. 5. 31 March, 2018 - Close at $6925 before short squeeze to near 10k in May. Only a good place to sell if you had the patience to wait until later in the year. The next golden cross was a year later near $5500. Waiting for that cross didn't give you a huge discount. 6. 26th March 2020 - Close at $6764. Price briefly headed sub-6k over the coming days, but that was pretty short-lived. This was a good buy-in point.
Even with Bitcoin , it's not always a surefire thing. And just as with Amazon, the worst declines after the death cross occurred were within the first few years of its existence. If Bitcoin and crypto are to continue solidifying their presence in global markets, and as assets, we might consider the possibility that the daily death cross doesn't mean much at all, aside from simply confirming that bullish momentum has been lost in the short term.
This is not financial advice! Just something I noticed. This is meant for speculation, education, and entertainment only.
-Victor Cobra
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Correction: 2nd of May, 2014 was the 3rd death cross for AMZN after Oct. 2010. Not 2004.
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There's a trendline on the Coinbase chart here, but doesn't look particularly good. We do know that Bitcoin likes to reverse when things look absolutely awful. Everyone seems to be expecting this head and shoulders to play out. Let's see if we get a bounce at this trendline and create a failed low. So far, buying pressure is certainly weak.
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Bitcoin has also broken below my pink trendline on Bitstamp, which is really important for the long term. I don't want to see continued selling momentum below this trendline, as that could mean we see the 13-20k zone next.
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Looking at TOTAL, this is a good spot for the market to bounce. Can see a big hammer today. If this support fails...well, the next major level for the market is the previous all-time high (bright green)
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Update:
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Nice reaction here on my Coinbase trendline:
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What’s really interesting is that the failed low here bottomed just slightly lower than the previous low….so if Bitcoin ends the bearish trend soon that will confirm what I was speculating about in this analysis - that selling at the death cross may only allow a purchase slightly lower, and would be pretty difficult to time.
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Less than 3 months after the death cross, a golden cross was printed, validating this original analysis.
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Well, it also looks like the golden cross doesn't mean much. If Bitcoin cannot recover quickly, we could see yet another death cross on the daily. Bitcoin is nearing a very important support zone. If global markets really fall apart, it likely won't hold.
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Confluence of supports in the form of trendlines and horizontal levels.
Holy moly! You were dead on. Market started bouncing right after your update.
This is a strong reaction with major volume. I can see this going all the way back up to the monthly open again. Possibly even the 4hr 200 ema, the daily 200 ema or even making a run at the multiple htf resistance level at 45k. I do believe we will see btc go lower one more time in the next couple of months, but we were so oversold on every level. We needed this bounce and we need to push upward for awhile now. Keep us informed on how high you think this may take us, the monthly open is a conservative target but ultimately we may go further than that.
VictorCobra
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@ClearOpenDoor, If it closes the month above 36K we can actually see new highs this year. This might have been bottom. But need to see buyers step in for once after this bounce, or it can roll over like the others. Bitcoin loves to make a failed low like this, and it often leads to taking out the most recent high, as you’re suggesting (45k). Also a lot of people were watching the 27k fib level and it just didn’t get there. Too many people front-ran the support, which happened also above 3k in 2018. Also too many people were looking at the massive head and shoulders.
Bitcoin needed to print a failed breakdown from the neckline to scare enough players out of position, especially spot holders. We’ve already seen leveraged longs wiped out. This shakeout was for spot holders (as can be seen by the dramatic drop in alts). Altcoins are sort of like a 3-10x leverage on Bitcoin. Anyway, thanks for your comment! Will of course keep you updated. There’s a curved downtrend I’ve been watching and I want to see if that can be cleared. It’s on my Gemini chart in another post.
-Victor Cobra
ClearOpenDoor
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@VictorCobra, Exactly right my friend! The smart money always front-runs the bottom on bitcoin, hahaha
Btw that head and shoulders has a target of less than 0? So, there is no way it will play out! This was the bull's last chance and that is why they are going to take it.
So true also about the fakeout with the neckline breakdown. From the daily it looks like we have already done it and are now headed back up for a bearish re-test.
I was hoping for a 4-hr inverse H & S to play out, but after that last 4-hr close it denotes further upside without a structural neckline for the inverse H & S in play. So, I've jumped back in hoping we somehow clear this major resistance with a surprise push in the next 4-hr candle.
Either way I am all-in for a move up to the mid-40s at this point. The market maker is having a field day taking the stops of traders back and forth in this broadening wedge on the daily, now I hope and pray we break upward all the way out of it and move at least to the .5 fib retracement at 46.8k. We could possibly hit the .618 but, ultimately the bottom is NOT in yet and so I will be looking to short again once we get back into that range.
The worst outcome would be one further drop from here. Or a move upward, another rejection and then further downside before the real bounce. I don't know if my account could take that with 6x leverage. We need to break this falling wedge and print a pretty crazy candle on the next daily.
Crypto-Quantum-Fox
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excellent analysis as per usual mate
ClearOpenDoor
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Wow! The amount of detailed analysis you put into this work is staggering. Amazing!
I agree with your sentiment. I have a rudimentary knowledge of MAs but rarely clutter up my charts with any of them. I view them as simply lagging indicators the areas of which sometimes group psychology causes price to react at. Occasionally I will turn on the 21 and 200 emas or even the 100 but I never leave them on. Same thing with the MACD and RSI.
What I do use on a regular basis are candlestick analysis, volume and money flow, fibonacci zones, areas of support/resistance and reversal/continuation patterns.
That being said I should practice with the things I am not used to more often in order to become a more versatile trader.
Thank you for this post :)
VictorCobra
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@ClearOpenDoor, Thanks so much for your comment! My approach is similar to yours, though I don't even use fib. levels (maybe the math scares me off). That's the one thing I should probably add to my analysis. I think MA's on smaller timeframes (such as the 15 minute --> 4H) can be helpful but ONLY when used in conjunction with candlestick and volume analysis. Volume is really key, as it tells me when buyers or sellers are getting exhausted. This current bottom (if it is indeed the bottom) is hard to discern....unless you look at volume on shorter timeframes. Honestly volume/candle analysis is probably the most important thing for me.
-Victor Cobra
ClearOpenDoor
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@VictorCobra, Interesting to come back and read our words again 3 months later 😁
VictorCobra
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@ClearOpenDoor, absolutely lol. One of the reasons I love TradingView. Hope you’re well!
This is a strong reaction with major volume. I can see this going all the way back up to the monthly open again. Possibly even the 4hr 200 ema, the daily 200 ema or even making a run at the multiple htf resistance level at 45k. I do believe we will see btc go lower one more time in the next couple of months, but we were so oversold on every level. We needed this bounce and we need to push upward for awhile now. Keep us informed on how high you think this may take us, the monthly open is a conservative target but ultimately we may go further than that.