Does The Death Cross Really Matter? (Amazon & Bitcoin)
업데이트됨
This is inspired by TradingShot's recent post (love their analysis). They posted all the instances of the daily death cross in Bitcoin's price history. For those who aren't aware, the death cross occurs when the 50 day moving average crosses below the 200 day moving average. If Bitcoin doesn't move well above 50k in the short-term, it's likely the death cross will occur relatively soon. The name is scary, of course, but just as the media tends to put forth bearish articles when price is doing poorly (since more people engage with content that confirms their bias), the death cross can simply be something that tends to occur when price stagnates or moves lower for a little while. Essentially, it could be meaningless.
I'm convinced sentiment and psychology are a lot more important than indicators such as Moving Averages (especially on the daily timeframe ). When I first started writing analysis, I didn't even include MA's at all. I began including them because I eventually realized how trading bots and algorithms use them to their advantage. And they do seem to be useful on bigger timeframes, such as the weekly and monthly.
Anyway, I keep thinking about how everyone is using past Bitcoin price action to determine current probabilities....but there are signs Bitcoin is maturing as an asset. In this case, I look at other assets that have matured (or solidified) over time. Take Amazon stock, for example. Prior to 2010, AMZN had 6 death crosses on the daily chart . 2 of them resulted in bull traps, while the other 4 indicated immediate new lows.
1. 5th August, 1999 - close of $48.63. Price declined to $41 a few days later before the bull trap to second peak of dotcom boom at $113. Selling at that death cross, and you'd have to sit on your hands.
2. 15th March, 2000 - Decline from near $63.75 to $5.51 on 1st October, 2000 (over 90% drop).
3. 24th March, 2004 - took a year to decline from $39 to $31 (less than 25% drop).
4. 9th March 2006 - Decline from $35 - $26.
5. 28th February 2008 - Short-term decline from $67 - 60ish before a bull trap to $90 in August 2008.
6. 14th October 2008 - Decline from $55.86 to $34.68 in November 2008 (bottom of financial crisis).
Since then, there have been 7 more death crosses for AMZN . None of these produced any extensive bearish period. If you sold at 3 of those death crosses, there was no opportunity to buy lower afterwards. Even after the 4 that resulted in price declines, it would have been difficult to time the bottom, since ONLY ONE of them resulted in a decline of more than 10% (December 2018), making selling largely pointless.
1. 8th July, 2010 - The low had already been set a few days earlier. Closed at $116 and the golden cross occurred in September, when price was $150. Never saw such low prices again.
2. 29th December, 2010 - this death cross marked the exact low near $167.
3. 2nd May, 2004 - Close of $308. This is one case where price headed lower shortly thereafter, heading to the bottom of $284 a week later.
4. 28th March, 2016 - close near $580. Price was in an uptrend and continued afterwards. Golden cross three weeks later.
5. 12th December, 2018 - $1663 close, price dropped to a low of $1307 by Christmas Eve for the bottom of the tech capitulation.
6. 10th October 2019 - close at $1720. Golden cross in Feb. 2020, right before the COVID crash. AMZN dropped to $1626, so I suppose this one worked out as well, though the decline was less than $100.
7. 19th April 2021 - close at $3372, Golden cross just 10 days later, BULL TRAP to a low of $3127. Price is now almost back to what is was on the day of the recent death cross.
What does this all mean? It's possible that MA crosses don't matter so much on the daily timeframe once long-term confidence in an asset has been established, and particularly once institutions become involved. They may only indicate a temporary slowdown of momentum (or may simply be a result of momentum that has already slowed). Selling at death crosses in the first 10 years of Amazon would have given some pretty great swing trading opportunities, but this changed significantly in the next decade, as Amazon established itself as the behemoth it is today. This is likely because when it was a young asset there was a lot more uncertainty. Buying the dip wasn't necessarily a "given." Will that change with Bitcoin? We'll see.
Now let's look at Bitcoin Death Crosses
1. 27th December, 2011 - Close at $4.80, decline to $2. 01 in November.
2. 9th April, 2014 - close near $440, declined to near $346 over the next two days. Then price rebounded above $600 over the summer (this was a bull trap).
3. 5th September, 2014 - $480.52 close, eventual decline to $163.88 (bear market bottom on 14th Jan. 2015).
4. 14th September, 2015 - close near $230. Price briefly dropped a few dollars lower over the coming days but basically moved up from there. Good place to buy.
5. 31 March, 2018 - Close at $6925 before short squeeze to near 10k in May. Only a good place to sell if you had the patience to wait until later in the year. The next golden cross was a year later near $5500. Waiting for that cross didn't give you a huge discount.
6. 26th March 2020 - Close at $6764. Price briefly headed sub-6k over the coming days, but that was pretty short-lived. This was a good buy-in point.
Even with Bitcoin , it's not always a surefire thing. And just as with Amazon, the worst declines after the death cross occurred were within the first few years of its existence. If Bitcoin and crypto are to continue solidifying their presence in global markets, and as assets, we might consider the possibility that the daily death cross doesn't mean much at all, aside from simply confirming that bullish momentum has been lost in the short term.
This is not financial advice! Just something I noticed. This is meant for speculation, education, and entertainment only.
-Victor Cobra
I'm convinced sentiment and psychology are a lot more important than indicators such as Moving Averages (especially on the daily timeframe ). When I first started writing analysis, I didn't even include MA's at all. I began including them because I eventually realized how trading bots and algorithms use them to their advantage. And they do seem to be useful on bigger timeframes, such as the weekly and monthly.
Anyway, I keep thinking about how everyone is using past Bitcoin price action to determine current probabilities....but there are signs Bitcoin is maturing as an asset. In this case, I look at other assets that have matured (or solidified) over time. Take Amazon stock, for example. Prior to 2010, AMZN had 6 death crosses on the daily chart . 2 of them resulted in bull traps, while the other 4 indicated immediate new lows.
1. 5th August, 1999 - close of $48.63. Price declined to $41 a few days later before the bull trap to second peak of dotcom boom at $113. Selling at that death cross, and you'd have to sit on your hands.
2. 15th March, 2000 - Decline from near $63.75 to $5.51 on 1st October, 2000 (over 90% drop).
3. 24th March, 2004 - took a year to decline from $39 to $31 (less than 25% drop).
4. 9th March 2006 - Decline from $35 - $26.
5. 28th February 2008 - Short-term decline from $67 - 60ish before a bull trap to $90 in August 2008.
6. 14th October 2008 - Decline from $55.86 to $34.68 in November 2008 (bottom of financial crisis).
Since then, there have been 7 more death crosses for AMZN . None of these produced any extensive bearish period. If you sold at 3 of those death crosses, there was no opportunity to buy lower afterwards. Even after the 4 that resulted in price declines, it would have been difficult to time the bottom, since ONLY ONE of them resulted in a decline of more than 10% (December 2018), making selling largely pointless.
1. 8th July, 2010 - The low had already been set a few days earlier. Closed at $116 and the golden cross occurred in September, when price was $150. Never saw such low prices again.
2. 29th December, 2010 - this death cross marked the exact low near $167.
3. 2nd May, 2004 - Close of $308. This is one case where price headed lower shortly thereafter, heading to the bottom of $284 a week later.
4. 28th March, 2016 - close near $580. Price was in an uptrend and continued afterwards. Golden cross three weeks later.
5. 12th December, 2018 - $1663 close, price dropped to a low of $1307 by Christmas Eve for the bottom of the tech capitulation.
6. 10th October 2019 - close at $1720. Golden cross in Feb. 2020, right before the COVID crash. AMZN dropped to $1626, so I suppose this one worked out as well, though the decline was less than $100.
7. 19th April 2021 - close at $3372, Golden cross just 10 days later, BULL TRAP to a low of $3127. Price is now almost back to what is was on the day of the recent death cross.
What does this all mean? It's possible that MA crosses don't matter so much on the daily timeframe once long-term confidence in an asset has been established, and particularly once institutions become involved. They may only indicate a temporary slowdown of momentum (or may simply be a result of momentum that has already slowed). Selling at death crosses in the first 10 years of Amazon would have given some pretty great swing trading opportunities, but this changed significantly in the next decade, as Amazon established itself as the behemoth it is today. This is likely because when it was a young asset there was a lot more uncertainty. Buying the dip wasn't necessarily a "given." Will that change with Bitcoin? We'll see.
Now let's look at Bitcoin Death Crosses
1. 27th December, 2011 - Close at $4.80, decline to $2. 01 in November.
2. 9th April, 2014 - close near $440, declined to near $346 over the next two days. Then price rebounded above $600 over the summer (this was a bull trap).
3. 5th September, 2014 - $480.52 close, eventual decline to $163.88 (bear market bottom on 14th Jan. 2015).
4. 14th September, 2015 - close near $230. Price briefly dropped a few dollars lower over the coming days but basically moved up from there. Good place to buy.
5. 31 March, 2018 - Close at $6925 before short squeeze to near 10k in May. Only a good place to sell if you had the patience to wait until later in the year. The next golden cross was a year later near $5500. Waiting for that cross didn't give you a huge discount.
6. 26th March 2020 - Close at $6764. Price briefly headed sub-6k over the coming days, but that was pretty short-lived. This was a good buy-in point.
Even with Bitcoin , it's not always a surefire thing. And just as with Amazon, the worst declines after the death cross occurred were within the first few years of its existence. If Bitcoin and crypto are to continue solidifying their presence in global markets, and as assets, we might consider the possibility that the daily death cross doesn't mean much at all, aside from simply confirming that bullish momentum has been lost in the short term.
This is not financial advice! Just something I noticed. This is meant for speculation, education, and entertainment only.
-Victor Cobra
노트
Correction: 2nd of May, 2014 was the 3rd death cross for AMZN after Oct. 2010. Not 2004.노트
There's a trendline on the Coinbase chart here, but doesn't look particularly good. We do know that Bitcoin likes to reverse when things look absolutely awful. Everyone seems to be expecting this head and shoulders to play out. Let's see if we get a bounce at this trendline and create a failed low. So far, buying pressure is certainly weak. 노트
Bitcoin has also broken below my pink trendline on Bitstamp, which is really important for the long term. I don't want to see continued selling momentum below this trendline, as that could mean we see the 13-20k zone next. 노트
Looking at TOTAL, this is a good spot for the market to bounce. Can see a big hammer today. If this support fails...well, the next major level for the market is the previous all-time high (bright green) 노트
Update: 
노트
Nice reaction here on my Coinbase trendline: 노트
What’s really interesting is that the failed low here bottomed just slightly lower than the previous low….so if Bitcoin ends the bearish trend soon that will confirm what I was speculating about in this analysis - that selling at the death cross may only allow a purchase slightly lower, and would be pretty difficult to time.노트
Less than 3 months after the death cross, a golden cross was printed, validating this original analysis. 노트
Well, it also looks like the golden cross doesn't mean much. If Bitcoin cannot recover quickly, we could see yet another death cross on the daily. Bitcoin is nearing a very important support zone. If global markets really fall apart, it likely won't hold. 노트
Confluence of supports in the form of trendlines and horizontal levels. 
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