- Bitcoin formed a super bullish Golden Cross on May 20, 2020.
- Nevertheless, the cryptocurrency fell by up to 9 percent in an opposite movement.
- Earlier in February 2020, Bitcoin’s Golden Cross formation followed a 61 percent price crash.
On May 20, 2020, Bitcoin formed a Golden Cross, a widely followed, long-term bullish indicator for classic trend followers.
The pattern emerged when Bitcoin’s 50-day moving average exceeded the 200-day moving average, the first of such formations since February 18 and seven in the cryptocurrency’s lifetime. Moving averages provide an accurate picture of a price trend by using older data and removing noise caused by intraday fluctuations.
But buyers did not enter the Bitcoin market on Golden Cross-FOMO, leaving the cryptocurrency vulnerable to a deeper downside correction. From painting the 50-100 DMA crossover to local soil yesterday, bitcoin fell $ 913, or about 9 percent, to $ 8,800.
Not an isolated incident, Bitcoin’s immediate relapse after forming the Golden Cross was similar to price movements as of February. At the time, the cryptocurrency rose about 60 percent, tested the long-term falling trend line, pulled back and formed a golden cross.
But the bullish pattern did not help bitcoin maintain its rally. The price fell by as much as 61 percent on March 13, 2020.
As can be seen in the chart above, Bitcoin’s recent price action seemed identical to the February fractal. Again, the cryptocurrency rose below $ 4,000 from the bottom to close above $ 10,000. It then tested the same downward trendline for an outbreak, but failed. Later, the price was corrected downwards while painting a gold cross.
While bitcoin remained strong support near USD 9,000, it now risks completing the February fractal with an extended downward correction to a 50-day moving average (blue), followed by a 200-day moving average retest. These levels fall within the price range of $ 8,000 – $ 8,100 as of May 22.
The deeper downward correction in the period from February to March was due to a deterioration in macroeconomic health. The increasing number of coronavirus cases in the United States took its toll on investor risk. They dumped assets in almost every market and even crashed the Dow Jones to the lowest since the 2008-09 financial crisis.
Traders eventually dumped safe-haven assets, including bitcoin and gold, to cover their losses elsewhere, plunging alongside global stocks. But the entire market recovered almost simultaneously after central banks decided to intervene with expensive stimulus packages to mitigate the financial damage caused by the corona virus outbreak.
The pandemic did not completely disappear or disappear in May 2020. Health experts warn that the second wave of infections could hit China, Europe and the US as they plan to reopen economies completely. At the same time, the Federal Reserve has pledged to continue its stimulus program indefinitely to help the markets – an ingredient that was missing during the March sale.
That can help Bitcoin limit its downward moves below 50 and 200 DMA.