Bitcoin’s Golden Cross Nears as USDT Signals a Potential Rally

Bitcoin is approaching a closely watched bullish indicator known as the golden cross. Although the pattern has delivered mixed results for BTC historically, another market signal involving USDT is adding weight to the current bullish setup.

Bitcoin was trading around $79,639.16 as it moved toward the formation of the signal, which occurs when the 50-day moving average climbs above the 200-day moving average. Traders typically interpret the crossover as evidence that short-term price momentum is strengthening relative to the longer-term trend and potentially signaling a broader bullish phase.

The 50-day and 200-day periods are not based on any special mathematical formula. They became widely followed benchmarks after generations of investors adopted them across traditional markets such as stocks, bonds and commodities before the same indicators became popular in crypto.

Still, the golden cross has plenty of critics. Because moving averages are calculated from past prices, they are inherently lagging indicators. By the time a crossover appears, a significant portion of the underlying price move may have already taken place.

Bitcoin’s Golden Cross Track Record

Bitcoin’s history with the indicator is far from consistently bullish.

Since 2012, BTC has produced 12 instances in which its 50-day moving average crossed above its 200-day average. Only some of those signals developed into major, lasting advances.

The first occurred on Feb. 9, 2012, after which Bitcoin gained 306% over the following year. Another crossover in October 2015 remained in place for more than two years and accompanied Bitcoin’s climb to its then-record high of nearly $19,800 in December 2017.

A May 2020 golden cross was another major success. Bitcoin gained 312% over the next year and eventually reached almost $64,900.

Other signals were much less durable. Golden crosses in July 2014 and July 2015 were both followed by death crosses within two months, ending the bullish formations before a three-month performance could even be properly assessed.

Several more recent crossovers generated impressive short-term gains, with some exceeding 40% over three months, but later reversed into death crosses before reaching the one-year mark. The September 2021 crossover was particularly weak, producing only a 1.5% gain before fading a few months later. Bitcoin subsequently suffered a decline of more than 70% from its highs over the following year.

The broader statistics highlight the mixed nature of the indicator. Among the nine golden crosses for which a three-month return could be measured, the average gain was 24.9%. However, just three of the 12 historical signals remained intact for a full year without first being invalidated by a death cross. Those three generated an average 12-month gain of 250%.

That suggests the golden cross has historically been more reliable as a three-month bullish indicator than as a signal of a sustained one-year trend.

USDT Dominance Adds Another Signal

Whether Bitcoin’s upcoming golden cross will last remains uncertain. However, USDT dominance is moving in a direction that has historically been associated with stronger crypto markets.

USDT dominance represents Tether’s circulating market value as a percentage of the total cryptocurrency market. When the ratio declines, it is often interpreted as a sign of increased risk appetite, with capital moving away from the stablecoin and toward Bitcoin and other digital assets.

The metric should not be interpreted too literally, however. Because USDT dominance is a ratio, it can fall simply because cryptocurrencies are appreciating faster than the stablecoin’s supply, even if investors are not actively selling USDT.

Even so, changes in USDT dominance have historically coincided with major shifts in Bitcoin’s trend. In November last year, for example, the USDT dominance chart formed a golden cross before the ratio climbed as Bitcoin entered a decline.

The situation is now moving in the opposite direction. TradingView data show USDT dominance approaching a death cross, with its 50-day moving average expected to move below the 200-day average.

Traders generally view a sustained decline in USDT dominance as a risk-on development because it means stablecoins represent a smaller portion of the total crypto market.

Two Indicators Point to Stronger Momentum

Bitcoin’s approaching golden cross and the potential death cross in USDT dominance are therefore pointing in a broadly similar direction.

The combination suggests BTC’s recent momentum is strengthening at the same time that stablecoins are making up a smaller share of the overall crypto market. While neither indicator guarantees that Bitcoin’s rally will continue, the two signals together provide a more constructive backdrop for the current price trend.

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