Bitcoin Awaits Golden Cross Amid 45-60% Rally Potential

Bitcoin is on the verge of confirming a "golden cross" on its daily chart by the end of May, a technical pattern that has historically preceded significant price rallies. This pattern occurs when the 50-day simple moving average (50-day SMA) crosses above the 200-day SMA, indicating a bullish trend. Previous instances of this pattern have led to substantial gains in Bitcoin's price, with rallies ranging from 45% to 60%. For example, in October 2024, a golden cross was followed by a 60% price increase, driven in part by the reelection of Donald Trump as the US president. Similarly, in October 2023, a golden cross preceded a 45% rally, fueled by Bitcoin ETF euphoria, and in September 2021, a similar crossover resulted in a 50% gain.

However, it is important to note that golden crosses are not foolproof indicators. In February 2020, a golden cross was followed by a 62% price crash due to the global market rout caused by COVID-19 lockdowns. This underscores the need to use golden crosses in conjunction with other technical and macro indicators, and to consider the possibility of unexpected events. Currently, Bitcoin's upcoming golden cross aligns with supportive fundamentals, such as an increasing M2 money supply and easing US-China trade tensions, which have bolstered bets on a new record high for Bitcoin.

Despite the bullish outlook, there are signs of potential short-term downside. Bitcoin's relative strength index (RSI) crossed above the overbought threshold of 70 earlier in May, signaling a possible correction. This, combined with a growing bearish divergence between the rising Bitcoin price and falling RSI, suggests that Bitcoin may initially pull back toward its SMA supports, which are around the $92,400-95,000 range as of May 20. Nonetheless, some technical indicators still see the potential for a Bitcoin price rally toward $150,000 in the coming months.

In summary, while the upcoming golden cross is a bullish signal for Bitcoin, it is not without risks. Investors should consider a range of factors, including technical indicators and macroeconomic conditions, when making investment decisions. The potential for a short-term correction should also be taken into account, even as the long-term outlook for Bitcoin remains positive.