Bitcoin Is Gearing up for the “Golden Cross”
Thus far, 2021 has been a great year for Bitcoin, with a new All-Time High around $42,000 and with continued interest from major investors such as MicroStrategy, Grayscale, and others. But the last few weeks have been bearish, with the digital king establishing support in the $30,000 area, and even dropping as low as $27,000 on some exchanges.
At the time of writing, Bitcoin has rebounded and it seems as the $30,000 level attracted institutional investors: Wednesday, MicroStrategy bought $10 million worth of Bitcoin at an average price of $33,810. This puts their total BTC assets at 71,079 BTC, acquired for $1.145 billion, at an average price of $16,109 per Bitcoin, according to their Twitter feed. Investment firm Grayscale also increased its Bitcoin holdings by purchasing the coin in late January when price was trading between $32,000 and $36,000.
As Bitcoin is rebounding, a very bullish pattern is forming: the Golden Cross. This is the crossing of the 50 periods moving average, above the 200 periods moving average and it’s widely considered a strong sign that price will continue to rally in the future.
The Golden Cross occurs in three stages and by the looks of things, Bitcoin is ready to move to stage two. The first stage is represented by the exhaustion of a downtrend or of an extended bearish move. BTC charts have been moving down but bearish momentum has waned around $30,000 support and price bounced up, thus this phase seems to be complete.
The second stage is the actual cross of the 50-period moving average above the 200-period moving average. Although this has not happened yet, the two moving averages are almost touching and the faster one (50 MA) is moving upwards, thus the cross seems imminent. The third stage is uptrend continuation, marked by the pair printing higher highs.
Chart Analysis – BTC/USD
Bitcoin is currently trading at 37,580 against the US Dollar, with a bullish bias although it is still moving below a major resistance level ($40,000). The bounce at $30,000 support generated a break of the bearish trend line and a move above both Moving Averages (50 MA and 200 MA), which are all bullish signs that suggest a move into the mentioned resistance at $40,000.
Given the popularity of the Golden Cross pattern, it is very probable that more investors and retail traders will join the ride once (and if) it actually occurs. However, it’s important to note that the previous high located around $38,500 will act as an important level, which may hinder upside movement. On the other hand, a break of this resistance would add more fuel to the fire and would increase the probability of a climb above $40,000.