A bitcoin price indicator is about to turn bullish for the first time since the early stages of the 2016-17 bull market.
The 50-candle moving average (MA) on bitcoin’s three-day chart is in a solid upward trajectory and looks set to cross above the 200-candle MA in the next few days.
That would be the first golden crossover on the three-day chart since early February 2016. CoinDesk reported on a golden cross for bitcoin’s daily chart back in April.
Seasoned traders often refer to that long-term bull market signal as a lagging indicator. After all, the MA studies are based on historical data and tend to lag prices, which also means they have limited predictive abilities at best.
While that is true for most crossovers, the one that is about to happen on the three-day chart has proved its mettle as a reliable bull market indicator in the past.
3-day chart (2016-2017)
The 50- and 200-candle MAs produced a bullish crossover in three days to Feb. 3, 2016, following which bitcoin’s price charted its way to a record high of $20,000 by December 2017.
A closer look at the chart reveals that the low of $360 printed a few weeks before the golden crossover was never put to test again. In fact, the 50-candle MA consistently reversed pullbacks (marked by arrows) throughout the rise from $360 (February 2016 low) to the record high of $20,000.
What’s more, the bullish crossover happened five months ahead of the mining reward halving of July 2016 and 13 months after bitcoin bottomed out near $150.
This time the MAs are about to produce a bull cross at least three quarters ahead of the reward halving, due sometime in May 2020, and seven months after the bear market ran out of steam near $3,100.
3-day chart (2019)
As of writing, the upward sloping (bullish) 50-candle MA is located at $6,566 and the 200-candle MA is flatlined at $7,438.
The golden crossover will likely happen before the month end, unless prices drop all the way back to $5,000, dragging the 50-candle MA lower. That, however, is unlikely to happen anytime soon.
If history is a guide, then the confirmation of the golden crossover could be followed by a rally to record highs above $20,000. Further, throughout the rally, the 50-candle MA will likely serve as strong support.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Bull’s eye image via Shutterstock; charts by Trading View