Bitcoin's MACD Prints Strongest Bull Signal In Over a Year

Bitcoin's MACD histogram is registering its highest value since January of 2018, which suggests bitcoin's price may have already bottomed out.

AccessTimeIconMar 4, 2019 at 11:00 p.m. UTC
Updated Sep 13, 2021 at 8:57 a.m. UTC

The moving average convergence divergence (MACD) has become the latest charting indicator to signal bitcoin may soon see a trend reversal that could put an end to its months-long price decline.

As reported, the money flow index (MFI), an indicator used to identify buy and sell pressure, created a divergence Sunday widely considered to be an early sign of a bearish-to-bullish trend change, while last week, bitcoin saw a bearish crossover of its 50- and 100-week moving averages, a first since 2015.

As such, the MACD became the latest in a series of indicators, that when applied to bitcoin point to seller exhaustion and a potential trend reversal as of Monday.

The MACD, by definition, turns two trend-following moving averages into a momentum oscillator by subtracting the longer-term moving average from the shorter-term moving average.

The price trend is considered to have turned bullish when the MACD line crosses above the signal line, the 9-period exponential moving average of the MACD line, at which point the histogram rises above the zero line. The higher the histogram, the father apart the MACD and signal line are, indicating stronger momentum.

As can be seen in the chart below, both bullish indications have indeed taken place.

BTC/USD Weekly Chart

CoinDesk - Unknown

Bitcoin's MACD line and signal line completed a bullish cross in early February suggesting a reversal to the predominant downtrend may be in order. Since then, the histogram, representing the space between the two lines, has gradually increased to where it stands now at 102.38 - its highest value since January of 2018.

Further, the histogram failing to set lower lows during its plunge from $6,000 to roughly $3,000 is another form of bullish divergence that points to weakening bearish momentum.

It's worth noting the MACD did make a bullish cross accompanied by a positive histogram value in September of last year before the fall to $3,000, but the lack of separation between the MACD and signal line was evident and an indication the crossover was weak or invalid.

This time around, the follow-through after the crossover is much more substantial.

BTC/USD Weekly MACD 2015

CoinDesk - Unknown

It can be seen in bitcoin's weekly price chart from 2015 that the strong bullish MACD crossover accompanied by rising, positive histogram values indeed confirmed the cryptocurrency's price bottom had been set. What's more, bullish divergence within the histogram was evident before the positive cross of the MACD and signal line, similar to how it is in bitcoin's current MACD readings.

While indications of bitcoin's price having bottomed out continue to emerge, caution is still the name of the game, so a break to new price lows backed by high sell volume would invalidate the bullish MACD signals.

Disclosure: The author holds BTC, LTC, ETH, ZEC, AST, REQ, OMG, FUEL, ZIL, 1st and AMP at the time of writing. 

Bitcoin on tablet  image via Shutterstock; Charts by TradingView

DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

Trending

1
CoinDesk - Unknown
Payroll, Web3 and the $62B Opportunity

Crypto can make it faster and cheaper to pay workers. This article is part of the “Future of Work” series.

CoinDesk - Unknown
2
CoinDesk - Unknown
You’re Hiring Wrong: Do It More Like Web3

By adopting a more open, fluid model, traditional firms would find it easier to attract talent and end up with a more passionate, engaged workforce.

CoinDesk - Unknown
3
CoinDesk - Unknown
The Crypto Jobs Boom
CoinDesk - Unknown
4
CoinDesk - Unknown
Voyager Digital Issues Default Notice to 3AC, Draws Down $75M of Alameda Revolver

Shares in the crypto exchange plunged last week on disclosure of its exposure to Three Arrows Capital.

CoinDesk - Unknown