How to make money in crypto by utilizing Golden and Death cross
Whether you want to use them or not, you will need to understand how moving averages work in order to understand some more advanced indicators. However, trading by using only moving averages is not uncommon and can be extremely profitable. Today, we will be talking about the Golden cross and the Death cross. These two occurrences are quite rare but powerful signals that traders are looking for.
They occur when the short-term and long-term moving averages cross. When the cross is to the upside, we are talking about the Golden cross. If the cross is to the downside, it’s called the Death cross.
Both Golden and Death crosses have predicted some of the worst economic downturns of the 20th century. As an example, the Death cross predicted bear markets in 1929, 1938, 1974, and 2008. When talking about cryptos, they are very popular as they underscore the strength and potency of the primary trend. This, in turn, enables traders to navigate the chaos that is the crypto market.
Golden cross
The Golden cross is an event that occurs when a short-term moving average crosses over a long-term moving average to the upside. This occurrence signals to traders that they can expect a strong bullish move.
There are two main requirements for a golden cross to be a good indicator of a move:
It has to spell an end to a sharp downtrend due to seller exhaustion.
The short-term moving average has to rise above the long-term moving average (traders typically use the 50-period for short and 100-period or 200-period for long moving averages).
As seen on the picture and highlighted in green, a Golden cross occurred on the daily BTC chart in March 2019, signaling a strong move to the upside and away from the low of $3,122.
Starting March 12, 2019, BTC price rose by as much as 260%, from $3,859 all the way up to near $14,000 on June 26.
The Golden cross is more accurate when analyzing long time frames.
Death cross
The death cross is the complete opposite of the Golden cross. This occurrence has two main requirements for it to be a true Death cross:
A death cross is created as an end to a bull trend due to long-term buyer exhaustion.
It shows up when the short-term moving average crosses beneath a long-term moving average (traders typically use the 50-period for short and 100-period or 200-period for long moving averages).
As seen in the picture, BTC showed greater bearish conditions on March 30, 2018, as the 50-day moving average crossed below the 200-day moving average. Following this Death cross came a 54% decline in value, namely from $6,850 all the way down to the bottom of $3,122 by December 15.
The Death cross is best identified when looking at longer time frames (just like the Golden cross).
Conclusion
Golden and Death crosses are great ways to determine trend changes on larger time frames. However, as with all indicators, they’re not always perfect. However, they are respected by the traders and, therefore, very valuable in the crypto trading community.