A lesser-tracked technical analysis indicator is signaling good times ahead for bitcoin.
- The cryptocurrency's 10-week simple moving average (SMA) is about to dip below the 50-week SMA, confirming a so-called bearish crossover.
- Historically, the negative signal has proven to be a contrary indicator, marking interim price bottoms and the end of bear markets, as the chart above shows.
- The previous bearish cross dated mid-March 2020 occurred after bitcoin's coronavirus-induced crash to $4,000. Bitcoin picked up in the subsequent months, setting record highs above $20,000 by December.
- Similarly, bitcoin bottomed out and rebounded at least 25% following the confirmation of the negative crossovers in early January 2020 and mid-June 2018.
- Moving averages are based on backward-looking data. Thus, on weekly and monthly charts, bearish and bullish crossovers can be taken to represent oversold or overbought conditions and the potential for price bounce and bull market corrections.
- That said, technical studies are unreliable as standalone indicators and seasoned traders prefer to read chart-based signals with money flow and fundamentals, which are currently signaling a low probability of a significant price bounce.
- Bitcoin suffered a deeper drop following the confirmation of the first bear cross between 10- and 50-week MAs seen in September 2014.
CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.