The head of research at CoinShares, James Butterfill, dismissed the notorious “Bitcoin death cross” indicator as “complete nonsense,” referencing historical evidence that indicates these occurrences often lead to positive market returns instead of prolonged downturns.
On April 8, Butterfill made these remarks just a day after Bitcoin (BTC) formed a death cross pattern. On April 7, BTC’s 50-day simple moving average (SMA) slipped to $86,485.72, dipping below the 200-day SMA at $86,839.64.
By examining 11 previous instances of death crosses, Butterfill found that BTC typically experiences slight losses within the first month following such events. However, the median and average returns over the subsequent three and six months were positive.
A death cross is a widely recognized technical signal that points to potential downward pressure when the 50-day simple moving average falls below the 200-day SMA.
Historical data indicates gains, not declines
The performance of Bitcoin following previous death crosses varies greatly. The analysis includes 11 historical cases dating back to 2011 and tracks BTC price fluctuations one month, three months, six months, and 12 months after each event.
A month following a death cross, Bitcoin’s median return was -1.6%, with an average loss of -3.2%. By the three-month mark, those statistics improved significantly to a median return of 3.7% and a mean of 13.6%.
Returns at the six-month and one-year marks were even more promising, averaging 17.0% and 52.3%, respectively, though the median return for the year remained in the negative at -17.2%.
This variation in outcomes emphasizes the indicator’s unpredictability as a forecasting tool. For instance, the death cross in March 2020 preceded a remarkable 450% price surge one year later.
In a similar vein, the events of 2011 and 2015 ultimately resulted in triple-digit returns in the following year, countering the bearish sentiment surrounding the signal. On the other hand, the death crosses of 2021 and 2018 were followed by double-digit losses after a year.
Butterfill highlighted these varied results to support his view that the pattern lacks empirical validity. He stated:
“For anyone who thinks the Bitcoin death cross means anything – it’s empirically total nonsense, and often a prime buying opportunity.”