This sign appears for the first time in history Bitcoin (BTC). The 20-week moving average (20W MA) just crossed the 200-week moving average (200W MA). Although the price of BTC has never experienced such a situation, perhaps the correlation with the traditional stock market (SPX) will give us some clues.
In this article, BeInCrypto presents a close-up of the first signal that is now being generated on the weekly Bitcoin chart.
20W MA made an unconfirmed death cross with 200W MA. In traditional markets, this event is usually confirmation a bear market long term. However, it is the correlation with the S&P 500 (SPX) that can help us give this signal a clearer interpretation.
In the long-term log chart, we can see that BTC price rarely reaches the 200W MA area (blue line). it happened only a few times in history, in the process of generating absolute funds from previous bear markets (green circles).
Also, historical declines have typically kept weekly candlesticks from moving below the 200W moving average, although there have been rare exceptions.
Therefore until now the 200 W MA level was assumed to be a indicator firm from BTC bottom and was a great buying opportunity. In the past, the growth in this area has been impressive:
- in 2015: up 8313% from the last decline of $230,
- in 2019: up 313% from the last pullback of $3,351,
- After the COVID crash in 2020: Up 1,047% from $5,620 rejection.
The story of reaching the absolute bottom near 200 W MA is supported by the famous “rainbow diagram“Bitcoin. Plots the logarithmic regression region, color-coded according to the rainbow spectrum, best to buy, hold or sell.
Years bear markets In the past, BTC always hit the blue and purple areas of maximum selling and buying opportunities. Now is no different BTC is in the last purple “fire sell” area since the June dips.
the first cross in history
However, the current situation in the chart is slightly different. Bitcoin failed to break the 200 week moving average level and has already closed more than 10 weekly candles below it (blue circles at top).
Also, an attempt to move back above this moving average in mid-August failed. This led to a new test and rejection, which is a bearish sign.
However, the most alarming signal that appears for the first time comes from the 20 W MA. This medium-term moving average has broken below the 200W moving average (Red arrow). The drop below is not yet confirmed because Vela the weekly has not closed yet. But it seems inevitable this week or next.
We see this in historical analysis neither in 2015 nor in 2019 there was no death cross between the 20W moving average and the 200W moving average (green arrows). The only thing that can be observed is that after the maximum convergence of these two lines, the price of BTC increased sharply.
Of course, this is because both moving averages are there indicators retards, that’s why they indicate price action in the past and do not predict the future.
200 W MA and correlation with the S&P 500
Nevertheless, on your chart, the 20W MA crosses the 200W MA for the second time in history. This is because you have drawn moving averages of the relationship between bitcoin price and the S&P 500 index.
In the graph’s commentary, he points out that the cross of death it happened in 2015, and it happened at an absolute rock bottom. Furthermore, he adds, “just a few months ago, one of the biggest bull runs in $BTC started.”
The graphic above not only provides additional interpretation of the cross of death we have discussed, but also it also shows BTC’s long-term dominance over the traditional stock market. The same aspect was pointed out today by the famous @100trillionUSD whose creator of the Stock-to-Flow model about Bitcoin.
In his tweet, PlanB acknowledges that BTC’s correlation with SPX is strong today, but the magnitude of the historical increase is unmatched. According to their calculations, during the same period SPX is up 4x and BTC is up 2000x, which he calls “completely different worlds”.
Of course, a difference of this size should not be expected today, though if only because of a much larger market cap cryptocurrency and Bitcoin sector.
But the bottom line is that BTC is still a more favorable long-term investment than SPX, and the 200-week moving average area is a great place to get involved.
For the latest Bitcoin (BTC) analysis from BeInCrypto, Click here.
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