A Major Bitcoin MA Crossover Just Hit

May 17, 2023

IN TODAY’S LETTER

What we cover: Bitcoin’s 200ma-365ma crossover just hit. Crossover stats for a 1-year hold. Multiple holding times analysis. The 28,750 to 34,800 Supply Zone. A potential Bull Flag emerges for Bitcoin.

TODAY’S STATS

We've got the stats for one of Bitcoin’s most bullish moving average crossovers

While historical occurrences of long-term moving average crossovers will always be limited in number for a relatively new asset like Bitcoin, the 200ma > 365ma crossover stands out. What our query may lack in statistical significance, it makes up for with its stunning performance characteristics. Naturally, twenty years forward we’ll have a much better statistical picture of this particular moving average (MA) crossover, but in the meantime we’ll delve into the data we do have for the world’s first P2P cryptocurrency Bitcoin.

`BITCOIN (BTC/USD). Daily Chart with latest 200ma and 365ma crossover.`

Our first query is simple: how has Bitcoin performed historically when its widely watched 200-day moving average (200ma) crosses over (i.e., becomes greater than the value of) its 365-day moving average (365ma)? We’ll first look at a simple “sell one year later” scenario before looking at various holding times.

OUR BITCOIN QUERY'S SETUP CONDITIONS:

CONDITION 1: Bitcoin's 200ma crosses over its 365ma


ENTRY AND EXIT CONDITIONS:

1. ENTRY CONDITION: Enter long ("buy") at the open of the next daily candle
2. EXIT CONDITION: Exit ("sell") 1 year later

Here are the results using a 365-day (one year) hold:

`BITCOIN (BTC/USD). Query Results for BTC with a 1-year Hold. 2011-Now.`

The four historical occurrences have been profitable 3 of 4 times (75% win rate) with an average trade of +361.3% over a 1-year holding period. These trades occurred in July 2012 (about 4 months before the 1st Bitcoin halving), November 2015 (roughly 8 months before the 2nd halving), July 2019 (about 10 months before the 3rd halving), and most recently in August 2020 (just following the most recent halving). The sharp contrast between the best trade of +1100% and the worst trade of only -5.9% is rather tantalizing. Measured another way, the sum of gross hypothetical gains is over 247 times the sum of its gross losses, delivering the jaw-dropping Profit Factor of 247.7.

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Now let’s look at Bitcoin’s results for Average Gain and Average Loss across various holding times ranging from 7-days to a year. Note that the Win % shows how many trades were profitable, hypothetically speaking.

`BITCOIN (BTC/USD). Holding Time Results for 200ma>365ma Crossover. 2011-Now.`

Over the short-term 7-day and 15-day hold times, this crossover has seen only success in Bitcoin, experiencing no losses. While our most recent query suggested mild short-term bearishness (“8 Days Down for Bitcoin? Expect Struggle”, published 5/15/23), the short-term outlook for the 200ma > 365ma crossover is decidedly better. Looking beyond the short-term time horizon, the 180-day and 365-day hold times stand out here for their outsized average gain and modest average loss.

THE TECHNICAL VIEW

A Potential Bull Flag Emerges for Bitcoin

While there’s no change to our intermediate-term outlook that the 28,750 to 34,800 Supply Zone continues to pose an obstacle to further upside attempts, the short-term picture may now be improving with the potential formation of a classic Bull Flag pattern on Bitcoin’s daily chart. Further consolidation inside of the upper and lower boundary may eventually lead to an upside breakout attempt and a close back above the psychologically important 30,000 level. If this scenario plays out, we’d see yet another attempt to move through the Supply Zone, arguably equivalent to another swing of a wrecking ball. With enough swings at the 28,750 to 34,800 Supply Zone, Bitcoin may just bust through. Beyond the chart, the “Halving vs. Recession” debate remains the central narrative tension dominating Bitcoin at present. The good news? As the current wall of worry for crypto grows, the Bitcoin bulls may be getting ready to scale it.

`BITCOIN (BTC/USD). Daily Chart with 100ma.`

THE TLDR

A Few Key Takeaways

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✔ Historical occurrences of long-term MA crossovers will always be limited in number for a relatively new asset like Bitcoin
✔ The sharp contrast between Bitcoin's best hypothetical trade of +1100% and  worst trade of only -5.9% is tantalizing
✔ There’s no change to our intermediate-term outlook that the 28,750 to 34,800 Supply Zone continues to pose an obstacle
✔  The short-term picture may now be improving with the potential formation of a Bull Flag, however

peace_love_crypto

-DB

IMPORTANT DISCLAIMER

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