Bitcoin Price, S&P 500 Approaching Bullish ‘Golden Cross’ Signal, Loved by Technical Analysts
Bitcoin (BTC) and Wall Street’s stock benchmark, the S&P 500, are on the verge of hitting an easily tracked bullish technical signal — the golden cross — that often makes traders giddy with joy.
A golden cross occurs when the 50-day simple moving average (SMA) of the security’s price moves above its 200-day SMA, producing a cross on the price chart. Because moving averages are backward-looking indicators, the signal only tells us that the market’s short-term gains have exceeded its long-term gains. Still, chart analysts and traders see it as a harbinger of higher prices in the long term.
“The winds of change have begun to blow with the increasing likelihood of a bullish golden cross in the near future,” analysts at Valkyrie recently noted in a newsletter, referring to the impending crossover on the daily bitcoin and S&P 500 charts.
Bitcoin is likely to see its first golden cross since September 2021 in the next week or two, according to charting platform TradingView. Meanwhile, the S&P 500 averages look set to produce the golden cross on Thursday.
The simultaneous appearance of the golden cross on bitcoin and the S&P 500 may motivate trend-following crypto traders to hit the market with new bids. Bitcoin has developed as a macro asset since early 2020 and tends to move more or less in line with the S&P 500.
However, traders should note that while bitcoin’s big rally often starts with a golden cross, not all golden crosses lead to a big rally.
Bitcoin has seen eight golden crosses to date, three of which, confirmed in February 2012, October 2015 and May 2020, were on point, heralding at least a year-long bull market that saw prices rise between 100% and 350%, TradingView data shows.
On the other hand, golden crosses of July 2014, July 2015 and February 2020 were bull traps as the cryptocurrency crashed violently into a death cross in the following weeks/months. The death cross is the opposite of the golden cross and represents a bearish shift in the long-term trend.
The remaining two golden crossovers, formed in April and September 2019, were indecisive, with prices rising sharply in the following two months, only to slide into a death cross later.
The S&P 500’s past data paints a similar picture. The index has seen 52 golden crosses since 1930. In that time, stocks rose the following year 71% of the time, according to a MarketWatch report citing Dow Jones Market data.
So the golden cross seems unreliable as a stand-alone bullish indicator and should be read in the context of other factors, mainly Federal Reserve policy, which is becoming less hawkish with each passing month.
As expected, the central bank stepped down to a smaller interest rate increase of 25 basis points on Wednesday, lifting the benchmark borrowing cost to the new range of 4.5% to 4.75%. During the post-meeting press conference, Chairman Jerome Powell acknowledged that “inflation has moderated somewhat” while downplaying the risk of an austerity-induced economic recession, prompting cheers for risk assets.
According to ING analysts, the Fed is likely to deliver another 25 basis point hike in March and then halt the rate hike cycle that rocked financial markets last year.
