James Butterfill, the head of research at CoinShares, has dismissed the “Bitcoin death cross” indicator as “total nonsense,” pointing to historical data that suggests these events often lead to positive returns rather than prolonged declines. Butterfill made this statement in a post on April 8, following Bitcoin’s registration of a death cross pattern on April 7. The death cross pattern occurs when BTC’s 50-day simple moving average falls below the 200-day SMA.
Analyzing 11 previous instances of the death cross, Butterfill found that while Bitcoin typically sees minor losses in the month following the event, the median and mean values for the subsequent three and six months are positive.
The death cross is a widely recognized technical signal that suggests potential downward momentum when the 50-day SMA crosses below the 200-day SMA.
Historical data points to gains over collapses
Bitcoin’s performance after past death cross events has varied significantly. Looking at 11 historical instances dating back to 2011, the data measures BTC price changes one, three, six, and 12 months after each event.
One month after a death cross, Bitcoin’s median return was -1.6%, with an average of -3.2%. By the three-month mark, the median return improved to 3.7% and the average to 13.6%.
Returns at the six-month and one-year marks were even more positive, with average returns of 17.0% and 52.3% respectively, although the median one-year return remained negative at -17.2%.
The varying performance highlights the inconsistency of the death cross indicator as a predictive tool. For instance, the death cross in March 2020 was followed by a 450% price increase one year later.
Similarly, the 2011 and 2015 death crosses led to triple-digit returns over the following year, contradicting the bearish interpretation of the signal. On the other hand, the 2021 and 2018 death crosses resulted in double-digit losses after twelve months.
Butterfill cited these mixed results to argue that the pattern lacks empirical reliability, stating:
“For those who believe the Bitcoin death cross holds significance – empirically, it’s completely baseless and often presents a good buying opportunity.”
