Bitcoin recently made the "Golden Cross" and the 50-day moving average closed above the 200-day moving average, a positive development for traders who see it as a bullish indicator. However, the comparative cryptocurrency dropped sharply immediately after forming the bullish crossover.
The Bitcoin-dollar exchange rate fell below both 50 and 200 DMA earlier this week, Golden cross formation. On Friday, the pair saw the weekly low at $ 8,428.80. At its highest level to date, the US crypto exchange was traded at $ 10.030 on Coinbase.
Bitcoin fell into a sales trap shortly after investors began to lose faith in global stocks and commodities. Sitting on attractive profits, crypto money has become an attractive asset among people who want to generate cash. They sold everything for the offer and ran under the safety of what they thought was their paradise.
Even Gold, which is often considered an older version of a digital bitcoin, slipped long before closing the week. Investors sold it in cash, as they did in the 2008 financial crisis.
Despite today's decline, #gold still over 6.5% this year. Nevertheless, the gold mining stocks index GDX fell almost 10%. Merchants still do not understand. Gold is much higher than mining companies' earnings and reserves. Buy dip!
– Peter Schiff (@PeterSchiff) Instagram photos and videos February 28, 2020
Less Prediction Power
Bitcoin's downward moves showed that investors generally did not see the Golden Cross as a signal to enter the market. The trend also revealed that the indicator has little predictive power against serious macroeconomic fundamentals. Sometimes prices go up and sometimes down.
However, by taking clues from Dow Jones, a US index that created the Cross in 2019 for the first time in three years, you may find that they tend to consistently yield positive results after six months. Dow had increased more than 14 percent as of February 12, 2020 after making the Golden Cross on March 19 last year.
However, the super-bull technical indicator failed with the spread of Coronavirus in and out of China. Even Dow fell under his own Golden Cross on the last sale and showed how investors want liquidity. Bitcoin, which had increased more than 40 percent before the fall, had no chance.
Hopeful Tomorrow for Bitcoin
Friday, US Federal Reserve came to save the market By ensuring to investors that "the fundamentals of the US economy remain strong". However, president Jerome Powell also said that they would "act appropriately to support the economy".
“The coronavirus poses emerging risks for economic activity. "The Federal Reserve closely monitors developments and their impact on the economic outlook."
The announcements came when the market wanted the Fed to initiate fresh interest cuts. Unlike the European Central Bank, which has lowered pigeon policies rates below zero, the Fed can still correct its own interest rates. It is currently between 1.5 percent and 1.75 percent.
Easy borrowing can give investors more money to support their portfolios. Some of this money also reached Bitcoin, causing it to continue rising above the Golden Cross, especially after its supply rate cut in May 2020.