Summary
- Bitcoin's daily 50-day exponential moving average (EMA) dipped back below the 200-day EMA on Friday evening, as BTC fell to $77,438, negating the golden cross that had been confirmed earlier in the day.
- The 4-hour chart continues to show a golden cross, although momentum appears to have weakened.
- This reversal coincides with a shift in the rates market, where the likelihood of a rate hike at the upcoming Federal Reserve meeting has surged to 86% according to CME data.
Bitcoin's momentary confirmation of a daily golden cross was short-lived, failing to hold through the afternoon.
Currently, BTC is trading at approximately $77,438, reflecting a 1.19% increase for the day, but it has retreated from an earlier peak of around $79,837. This decline aligns with a more hawkish sentiment in the rates market following the release of inflation data.
The latest Consumer Price Index (CPI) figures revealed a core monthly increase of 0.3%, surpassing the anticipated 0.2% by analysts. The CME FedWatch tool, which assesses probabilities based on 30-day Fed funds futures, initially indicated a 69% chance of a 25-basis-point interest rate hike shortly after the inflation figures were released. These odds have since escalated to 86.5% within just a few hours.
Typically, a rate hike could trigger a shift towards risk-off sentiment among investors, which may negatively impact risk assets such as Bitcoin and technology stocks if the Fed opts to raise rates in the upcoming meeting.
Today, Bitcoin's trading session opened at $76,529, surged to a high of $79,837, dipped to a low of $76,040, and ultimately settled around $77,438—still representing a 1.19% gain for the day, but significantly lower than the earlier highs.
This volatility was sufficient to revert the daily EMA reading to a bearish stance: Bitcoin's 50-day EMA, which reflects the average price over the past 50 days, had briefly crossed above the 200-day EMA on Friday. This phenomenon, known as a golden cross, is one of the most positive chart patterns and had not occurred since last November, but it was short-lived.
With the 50-day average falling back below the 200-day, Bitcoin remains on the cusp of achieving a golden cross, although it appears that today may not be the day for that to occur.
Understanding the Temporary Nature of a Flickering Golden Cross
A golden cross arises when a shorter-term moving average, such as the 50-day EMA, crosses above a longer-term one, like the 200-day EMA.
This signal is closely monitored across markets due to its historical correlation with significant Bitcoin rallies. However, it is a lagging indicator based on past prices, and when the two averages are in close proximity—like they are now—the signal can fluctuate within a single trading session due to intraday price movements.
Today's fluctuations exemplified this: a rise to $79,837 pushed the 50-day EMA above the 200-day, while the subsequent drop to $77,438 pulled it back down.
For those analyzing daily charts, this incident serves as a reminder of how precarious some golden crosses can be. When moving averages are closely aligned, a single volatile trading session can cause the crossover to oscillate before stabilizing. The daily candle remains open, suggesting that this reading could change again before the day concludes.
Despite the back-and-forth movement, trend strength remains solid regardless of the position of the price relative to the cross.
The Average Directional Index (ADX), which measures trend strength irrespective of direction, is currently at 45—well above the 25 threshold that indicates a genuine trend versus market noise. Positive directional movement continues to outpace negative movement.
The Relative Strength Index (RSI), which gauges momentum on a scale from 0 to 100, indicates that Bitcoin is at 55.5—still in the bullish territory, suggesting that there is optimism among bulls.
4-Hour Chart: Bullish but Losing Momentum
In contrast to the daily chart, the 4-hour chart has maintained its golden cross. The 50-period EMA remains above the 200-period EMA, preserving the overall bullish trend established in late August. However, other indicators on the 4-hour timeframe have shown signs of cooling down.
The RSI has dropped to 43.3, entering bearish territory. The Squeeze Momentum indicator, which had been compressed for several days, has just activated, with volatility expanding by 3.95%—a typical precursor to an impending sharp move, in this instance likely downward.
The ADX on the 4-hour chart is currently at 25.1, just above the threshold, indicating that the intraday trend is significantly weaker compared to the daily trend.
Overall, the larger context still leans bullish. The 4-hour chart has remained stable since late August, while the daily ADX at 45 confirms that a legitimate trend is present, even as the moving averages fluctuate during a volatile session.
Disclaimer
The opinions expressed in this article are solely for informational purposes and do not constitute financial or investment advice.