Understanding the Golden Cross Phenomenon: Bitcoin, XRP, and Ethereum
As we observe the cryptocurrency market, Bitcoin, XRP, and Ethereum — three of the most dominant coins — are nearing the occurrence of what is known as a 3-day golden cross. This event, although rare, signals significant movements in the market that investors and traders need to be aware of.
The Unprecedented Synchronicity of Major Cryptocurrencies
In the world of cryptocurrency, the 3-day golden cross signal is a rare occurrence. We have seen it happen a few times in the past for individual assets but to witness all three of these major cryptocurrencies — Bitcoin, Ethereum, and XRP — trigger this signal at the same time is unprecedented. So, what exactly does this synchronicity mean, and what are the implications of the 3-day golden cross?
Market Recovery: Led by Bitcoin, XRP, & Ethereum
Recent weeks have seen significant recovery in the crypto market far from the bleak outlook presented before. Large institutions like BlackRock are now looking to launch Bitcoin ETFs, in addition to significant victories for XRP and Ripple against the US Securities and Exchange Commission (SEC).
Related Reading: Perfect Storm: Why Bitcoin & Crypto Are Poised For A Dramatic Recovery
These events, coupled with the technical environment showing signs of a possible uptrend, are an encouraging sign for investors and traders. As these three top cryptocurrencies inch closer to a golden cross on the 3-day timeframe — a phenomenon that has only occurred a handful of times in the past — we can expect major movements in the market.
It is noteworthy that this is about to occur in Bitcoin, Ethereum, and XRP simultaneously – a first in their respective histories. In the past, these signals arrived at different phases of previous bull markets. Now, all three coins treading towards a golden cross could lead to a stronger rally.
Understanding the Golden Cross Phenomenon
So, what exactly is a golden cross in the world of crypto? A golden cross takes place when a higher timeframe moving average, typically a 200-period MA, crosses above a lower timeframe moving average, generally a 50-period MA, from below. This phenomenon is in contrast to a death cross, which occurs when these two moving averages cross downward.
Evaluation of the Moving Average Crossover
Assessing historical trends, we note only one time when the signal suffered a drawdown — in Bitcoin during 2019. However, in all other instances, the buy signal generated by the simple moving average crossover resulted in profitable returns with limited downside.
In 2015, the BTCUSD 3-day golden cross resulted in an impressive ROI exceeding 2,000% before giving the corresponding sell signal via a downward cross. The golden cross to death cross in XRP retained more than 9,000% of the uptrend’s gains. Ethereum, having insufficient price history, did not trigger a signal back then.
Related Reading: This Bitcoin Continuation Pattern Points To 3-6 Months Of Uptrend Ahead
In 2019, Bitcoin’s golden cross incidentally resulted in a relative drawdown. However, the buy signal was still effective overall and yielded a 550% ROI by the time a death cross signaled the closure of the position. When examining the five historic buy signals, an average ROI of 2,570% was achieved when a golden cross occurred. So, while such returns might not be expected in the future, it indicates that the signal could prove effective.
© Tony “The Bull” via @tonythebullBTC and @coinchartist_io on Twitter. Visit the TonyTradesBTC Telegram for valuable market insights and technical analysis education. Please note: All content provided here is for educational purposes and should not be taken as investment advice.