Could BTC’s Golden Cross Formation be a Trap?

The crypto winter seems to be coming to a close and Bitcoin has formed what is known as a ‘golden cross’. This is the first cross that has been formed since October 2015.

Essentially, what we’re trying to say, is that this is a pivotal point for the whole crypto space.

Before we go any further though let’s just clear a few things up.

Terminology

A moving average is an indicator that analyses different data points by generating a sequence of averages. If you look on Investopedia, they describe it as a tool which helps “smooth out price action by filtering out the ‘noise’ from random short-term price fluctuations.” This is because it follows a trend, it is based on past prices and can almost ‘predict’ the milestones in the market trend.

For those that don’t know about golden crosses, let us explain. When a short-term moving average passes above a long-term moving average signalling a potential bullish breakout, this is a golden cross. Many investors see this a very strong signal that a long-term bull market could occur.

On the other hand, a death cross appears on a chart when an asset’s short-term moving average crosses below the long-term moving average which suggests the potential for a huge sell-off.

“It is a reliable predictor of some of the most severe bear markets of the past century: 1929, 1938, 1974, and 2008.”

History

In February 2012, Bitcoin formed its first golden cross when the 50-day moving average went above the 200-day moving average. The price fell around 30 percent after this formed though.

Several golden crosses have occurred since then with one in 2014 and two in 2015, the last of which was in October that year. This was during a period of high speculation and volatility that represented a 7,000 percent bull rally for the ‘King of Cryptos’

Today

Fast forward to today and it seems that the crypto winter is coming to an end (if it isn’t already over). The golden cross pattern is one of the strongest sign that a bull run is on the horizon, but we wouldn’t recommend getting your hopes up just yet.

The pattern has failed before between 2014 and 2015, so instead of a bull run being around the corner, it could be a bull trap...