First signal of this kind in Bitcoin (BTC) history: Death Cross on 200 W MA

This signal appears for the first time in the history of Bitcoin (BTC). The 20-week moving average (20 W MA) has just moved below the 200-week (200 W MA). Although the price of BTC has never experienced such a situation, perhaps the correlation with the traditional stock market (SPX) will give us some clues.

In this article, BeInCrypto takes a look at the very first signal being generated right now on the Bitcoin weekly chart. The 20W MA made an unconfirmed death cross with the 200W MA. In traditional markets, this event is usually a confirmation of a long-term bear market. However, it is the correlation with the S&P 500 (SPX) that can help us give this signal a more bullish interpretation.

By purchasing about 200 W MA

On the long-term logarithmic chart, we see that the price of BTC has rarely reached the area of ​​200 W MA (blue line). This has only happened a few times in history, during the process of generating the absolute lows of previous bear markets (green circles). Furthermore, historical declines have not usually led to the closing of the weekly candles below the 200W moving average, although there were singular exceptions.

Therefore, until recently the 200W MA level was thought to be a solid indicator of the BTC low and a great buying opportunity. The increases that have followed to hit this area in the past have been impressive:

  • 2015: up 8313% from last bounce to $ 230,
  • 2019: up 313% from last bounce to $ 3351,
  • Collapse of COVID 2020: up 1047% from rebounding to $ 5620.
Tradingview BTC chart

The narrative of hitting an all-time low close to the 200W moving average is supported by Bitcoin’s famous “rainbow chart”. Outline logarithmic regression areas, color-coded according to the rainbow spectrum, ideal for buying, holding or selling.

During the previous bear markets, BTC has always reached the blue and purple areas of maximum buy and sell opportunities. It is no different now that BTC is in the last purple “sell off” area since the decline in June.

Bitcoin Rainbow Price Chart / Source: www.blockchaincenter.net

First cross in history

However, the current situation on the chart is slightly different. Bitcoin has failed to maintain the 200W MA level and has already closed more than 10 weekly candles below it (blue circles above). Furthermore, the attempt to move back above this moving average in mid-August proved unsuccessful. It led to a retest and rejection, which is a bearish sign.

However, the most alarming signal, which appears for the first time ever, comes from the 20W MA. This medium-term moving average has moved below the 200 W moving average (red arrow). The descent below is not yet confirmed, as the weekly candle has not yet closed. However, it seems inevitable this week or next week.

In historical analysis, we see that neither in 2015 nor in 2019 there was a death cross between 20W MA and 200W MA (green arrows). The only thing that can be seen is that after approaching the maximum of these two lines, there has been a significant increase in the price of BTC. Of course, this is because both moving averages are lagging indicators, so they refer to past price action and do not predict the future.

Tradingview BTC chart

200 W MA and correlation with the S&P 500

Cryptocurrency analyst @el_crypto_prof tweeted a Bitcoin chart in which he also pointed to the 200W MA death cross. However, in his chart, the 20W MA crosses the 200W MA for the second time in history. This is because he has drawn moving averages for the ratio of Bitcoin’s price to the S&P 500 index.

Source: Twitter

In a comment to the chart, he points out that the death cross occurred in 2015 and occurred after the absolute minimum was reached. Furthermore, he adds, that “just a few months later, one of the biggest bullish runs of $ BTC began.”

The chart above not only provides a further interpretation of the death cross that we have analyzed, but also shows BTC’s long-term dominance on the traditional stock market. The same aspect was highlighted today by the famous @ 100trillionUSD, creator of the Stock-to-Flow model for Bitcoin.

In its tweet, PlanB admits that BTC’s correlation with the SPX is strong today, but the magnitude of the historical rises is incomparable. According to his calculations, in the same period, SPX has increased by 4 times and BTC up to 2000 times, which he calls “completely different worlds”.

Source: Twitter

Of course, such an order of magnitude difference is not predictable today, at least since much larger market capitalization of the cryptocurrency and Bitcoin industry. However, the bottom line is that BTC remains a more favorable long-term investment than SPX and the 200W MA area is a great place to start.

To be[In]Crypto’s latest Bitcoin (BTC) analysis, Click here.

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