MUMBAI: After Monday’s crash following the fake news about Walmart’s acceptance of Litecoin for transactions at the company’s department stores, Bitcoin has managed to make a smart recovery towards the $47,000 level on Tuesday.
Now, all eyes of the crypto world are on the Bitcoin chart, as the world’s first and largest cryptocurrency is on the verge of making a ‘Golden Cross’ on the daily chart for the first time after forming a ‘Death Cross’ in June.
A ‘Golden Cuross’ is a term used by technical analysts to suggest a crossover of two important simple moving averages – the 50-day moving average over the 200-day moving average. As of Tuesday evening, Bitcoin’s 50-day moving average stood at $45,802 whereas the 200-day moving average was at $45,875, according to Tradingview.com.
A Golden Cross is usually seen by chartists as a lag indicator of potentially large gains in an asset. When the 50-DMA (short-term bullish indicator) moves above the 200-DMA (long-term bullish indicator), an asset class tends to deliver large outperformance over the medium term.
In the previous two instances when Bitcoin formed a ‘Golden Cross’ on the daily charts, the cryptocurrency’s value increased by five times and three times, respectively, technical analysts said. Overall, Bitcoin has seen seven instances of a ‘Golden Cross’ in its near 13-year journey.
A potential ‘Golden Cross’ on Bitcoin chart is likely to find support in other bullish metrics such as record low Bitcoin reserves with the exchanges as noted by Micheal van de Poppe, founder of the Netherland-based cryptocurrency consultancy firm Eight Global.
“Bitcoin exchange reserves are getting to very low levels. That’s a signal that we’ve got more and more holders. The inevitable is still about to happen, that is, a heavy supply shock upwards in which we’ll get a big run to higher numbers,” van de Poppe said on twitter on Monday.
Glassnode Insights, which provides on-chain analysis on cryptocurrencies, said investors are accumulating Bitcoin at lower levels while buyers of Bitcoin before January 2021 are still holding on to their coins.
Still technical analysts are cautious, given the recent ‘fake head’ breakouts given by Bitcoin that saw the price rise from the current cycle bottom of around $30,000 to a high of $52,000 before seeing two sharp drops from that level.
Some analysts said Bitcoin will first have to sustainably cross the resistance at the $47,000 level and then at $50,000 to make a run for the all-time high of over $64,000 hit in April 2021.