Bitcoin investors love the golden cross and death cross heres why they matter but there are other factors t – Business Insider India

Many in the Bitcoin trading game use the strategy of following the golden cross or the death cross when it comes to long term investment in Bitcoin one of the oldest strategies from the stock market world.

And, while it's certainly one of the indicators to follow if ones an investor looking to HODL, there are other market conditions that one should factor in as well like price history, risk involved, economic reports, an assets volatility and predictions about its price movement.

Hence, if you chart a price of Bitcoins average price over these periods and find that the 200-day curve is crossing the 50-day curve, thats a golden cross.

This is also marked by a crossing of the short term and long term average, however, in a death cross the short term average cuts the long term average while moving downward. It then continues moving downwards for a prolonged period, as the market settles into the bear phase.

As a result, a golden cross doesnt necessarily mean that the market will trend upwards and remain upwards for the long term. In traditional trading, investors would take long term positions based on a golden cross, which may not work for something like Bitcoin or Ethereum, which sometimes change prices in a matter of hours.

Some experts recommend changing the definition of short and long term. For instance, if the 50-day average is crossing the 200-day average upwards, then compare a 10-day average against the 50 and 200 day averages. Sometimes, you will find that the 10-day average is signalling towards a death cross. Which means you should be more careful about taking a long position and avoid a fakeout.

Return on Investment (ROI): The ROI can help you gauge the risk of putting money into a particular cryptocurrency. Trading platforms will often provide a profit vs cost analysis of an asset, which tells you what kind of risk youre taking.

A metric called Sharpe Ratio, which was developed by Nobel laureate William F. Sharpe, lets you measure risk. Its the ratio of the average return of an asset, earned in excess of the risk free rate against the volatility of the asset. Risk free rate is the rate an investor would expect from an absolutely risk free asset.

Open High Low Close (OHCL) prices: Trading platforms will also show you OHCL prices, which are basically graphs that track the open, high, low and closing prices of the cryptocurrency over a chosen period of time. It gives you a good idea of how the asset has been performing over that period, and can also be compared against all time highs (ATH) and all time lows (ATL) to get an idea of how the asset is performing.

Circulating supply: Bitcoin is an asset run by computers, but it still has a limited supply. Thats true for most other cryptos as well, and the available supply of an asset determines the liquidity in the market. The more coins in supply, the greater the liquidity available on the market.

Disclaimer: This is a sponsored post in partnership with WazirX. Do your own research (DYOR) before deciding to invest in any asset, cryptocurrency or otherwise.

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Bitcoin investors love the golden cross and death cross heres why they matter but there are other factors t - Business Insider India