Bitcoin investors love the Golden Cross and the Cross of Death – here’s why they’re important, but there are other factors to keep in mind

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They say you can’t apply traditional wisdom when it comes to the crypto market, but that doesn’t necessarily mean you can’t follow it using traditional means.

Many players in the Bitcoin trading game use the strategy of following the “golden cross” or the “death cross” when it comes to long-term investing in Bitcoin – one of the oldest strategies of the stock market.

And, while this is certainly one of the metrics to follow if one is an investor looking for HODL, there are other market conditions to consider as well, such as price history, risks involved, economic reports, volatility of an asset and forecasts regarding its price. movement.

What is the golden cross? The term “golden cross” is used in traditional stock market transactions, and its meaning does not change for Bitcoin either. A golden cross occurs when the short-term moving average of an asset crosses the long-term moving average. So if you track the price of Bitcoin on an exchange like WazirX on a daily basis, you can compare those averages by creating a chart. Usually, the short term is considered to be around 50 days, while the long term is considered to be around 200 days.

Therefore, if you plot a price of the average price of Bitcoin over these time periods and see that the 200 day curve intersects the 50 day curve, it is a gold cross.

The Golden Cross of May 20, 2020, when Bitcoin’s 50-day moving average broke its 200-day moving average on a price chart. which means it is a good time to invest your money in a particular asset. A golden cross usually begins with a fall in both averages, followed by the short-term average crossing the long-term average, and then the short-term average continues to rise as long as the market remains strong. What is the cross of death? The Death Cross, on the other hand, is the exact opposite of the Golden Cross and tells you that the market is about to go down, which means you may want to withdraw your money first.

This is also marked by a crossing of the short-term and long-term average, however, in a cross of death, the short-term average intersects the long-term average while moving downward. It then continues to decline for an extended period as the market moves into the bearish phase.

Why are the ‘golden cross’ and ‘cross of death’ important to Bitcoin? Now here’s the thing, while these metrics apply to Bitcoin and other crypto assets to some extent, it’s important to remember that cryptocurrencies ARE NOT traditional assets. The main difference is that they are much more volatile than almost any other popular asset class today.

As a result, a golden cross does not necessarily mean that the market will trend up and stay up for the long term. In traditional trading, investors would take long-term positions on the basis of a gold cross, which may not work for something like Bitcoin or Ethereum, which sometimes change prices within hours.

Some experts recommend changing the definition of short and long term. For example, if the 50-day average intersects the 200-day average upward, compare a 10-day average to the 50- and 200-day averages. Sometimes you will find that the 10 day average points to a death cross. Which means you need to be more careful when going long and avoid a “fakeout”.

What is a fake? A fakeout is basically a situation where an investor takes a position expecting a rally, but the asset instead moves down. This can happen for a variety of reasons, including unexpected regulatory actions, sudden withdrawals of people, etc. Example of a Golden Cross In August, tracking platforms and price charts suddenly suggested that a golden cross was on the horizon. The Glassnode blockchain tracking platform reported a possible golden cross occurring between Bitcoin’s 30-day and 60-day averages around August 19 and 20. The same was reported by traders around September 12th, but this time based on longer averages. Bitcoin has seen seven golden crosses in its history. Four times, its price subsequently dropped. Three times its price has subsequently increased. Trading View Via Data-Driven Investor Death Cross Examples On June 22 of this year, about three months after the crypto market entered a bearish phase, Al-Jazeera reported a death cross for Bitcoin, apparently sparked off by a flood of negative news about regulations being rolled out in China, which at the time was the world’s largest market for Bitcoin mining. We have seen seven death crosses in the history of Bitcoin. View Trading Through Crypto Writer Other Steps to Follow Cross tracking is one of the ways to make money trading any asset, but there are other steps to follow as well.

Return on Investment (ROI): ROI can help you assess the risk of placing money in a particular cryptocurrency. Trading platforms often provide an analysis of the benefits versus costs of an asset, which tells you what kind of risk you are taking.

A metric called Sharpe Ratio, which was developed by Nobel Prize winner William F. Sharpe, allows you to measure risk. It is the ratio of the average return of an asset, earned above the risk-free rate against the volatility of the asset. The risk-free rate is the rate an investor would expect from an absolutely risk-free asset.

Market Capitalization: Perhaps the easiest metric to watch is the market capitalization of a crypto asset, which you can do using platforms like Coinmarketcap. The best assets have the highest market caps, which means they have a lot of people betting their money and building platforms on top of it.

Open High Low Close (OHCL) Price: Trading platforms will also show you OHCL prices, which are basically charts that follow the open, high, low, and closing prices of the cryptocurrency over a period of chosen time. This gives you a good idea of ​​how the asset has performed over that time period and can also be compared to all-time highs (ATH) and all-time lows (ATL) to get a feel for how the asset has performed.

Circulating supply: Bitcoin is an asset managed by computers, but its supply is still limited. This is also true for most other cryptos, and the available supply of an asset determines the liquidity of the market. The more parts there are in stock, the more liquidity is available in the market.

It also requires investors to know how many coins sit in large Bitcoin wallets owned by users called ‘whales’. Some reports have indicated that 85% of Bitcoin’s current supply is in wallets and does not go into the cash pool.

Disclaimer: This is a sponsored article in partnership with WazirX. Do your own research (DYOR) before deciding to invest in any asset, cryptocurrency, or whatever.

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