KEY POINTS

  • The short-term MA is on the verge of crossing above the longer-term MA on Bitcoin's chart, which signifies the "golden cross" pattern
  • The golden cross was able to predict the rally last year and the parabolic run to BTC's peak price in 2017
  • The opposite of the golden cross, the "death cross," was also able to presage downturns in Bitcoin's prices

Bitcoin (BTC) buyers have taken a break since Sunday's selloff that has held the king of cryptos under $10,000. Altogether, BTC is down 6.11% this week, but it seems like there's still room for the price to drop even lower.

Those getting into cryptos for the first time are already freaking out, but Chanpeng Zhao advises them to chill, brushing it off as a "healthy retrace." As for Bitcoin hopefuls, their stance is largely unwavering, and this time calls the attention to a technical pattern that signaled massive rallies in the past.

What bulls are banking on is the "golden cross" pattern, which is a convergence of two moving averages (MA) that indicates that prices could be heading higher. The two moving averages that comprise it are one short-term and one longer-term.

And for the golden cross to take place, the short-term MA must cross above the longer-term MA. At the moment, the two lines have intertwined but have not diverged from their meeting point as of yet.

Popular trader CryptoBull pointed this out in his tweet, saying, "Ladies and gentlemen. Let me present the golden cross! The last time this happened was April 24th 2019 at $5,400. Before that was October 28th 2015 at $300."

The instances that CryptoBull identified was spot-on in preceding a rally. One was before the run-up to Bitcoin's high in June last year. The $5,400 price after that golden cross ballooned to almost $14,000. Then, of course, the other instance in 2015 prefaced the parabolic run to near $20,000.

The signal does have its antithesis called the death cross, in which the kind of opposite cross happens (the short-term MA crosses below the longer-term MA). It is also accurate in presaging downturns, notably, four severe bear markets in equities: 1929, 1938, 1974 and 2008.

It appeared on Bitcoin's chart back in October and took BTC to $6,430 from a pre-death cross high of $10,540. It also occurred in March 2018, months after dropping from its peak 2017 value, but still heralded a bear market that lasted about a year.

BTC trades at $9,717 as of press time.

Bitcoin in Emerging Economies This picture shows a person holding a visual representation of the digital crypto-currency Bitcoin, at the 'Bitcoin Change' shop in Tel Aviv, Israel, Feb. 6, 2018. Photo: JACK GUEZ/AFP/Getty Images