Cryptocurrency is a relatively new asset class, having been around for around a decade and a half. As a result, cryptocurrency stocks are extremely volatile and lure fewer investors than regular markets. However, like the regular stock market, cryptocurrency has bull and bear markets. And, just as it is nearly difficult to predict the traditional market exactly, the same is true of the cryptocurrency market.
Bull and Bear Market
Although cryptocurrency is a new asset class, it is still one. A lot of traditional market terminology, including bear and bull markets, may be used in the cryptocurrency market. The bull market occurs whenever the market is increasing and continues to increase for an extended period, and the increasing tendency is known as an uptrend.
An increase in stock purchases is seen in a bull market because investors believe they will benefit from the growing prices. A bull market signifies that a country’s economy is strong and has a low unemployment rate.
Since the economy and job rates are high, most people have more disposable income to meet their fundamental needs. As a result, individuals spend money on items that improve their quality of life, resulting in a bull market.
Exponential Moving Average
One way to monitor the long-term trend of an asset is via the EMA. The EMA highlights recent price fluctuations while simultaneously revealing prior chart patterns, improving comparability.
Because it notifies you about the latest price trends, this signal is the best tool for traders trading in fast-moving and unstable markets like the cryptocurrency market. The EMA functions as a continuous support and resistance line in addition to identifying trend trajectories.
For bitcoin trading, EMA suffers from some drawbacks. While strong bullish movements are very common in bitcoin trading, the EMA does not pick up. Cryptocurrency markets are highly volatile, which means that the EMA might also give out erroneous indications.
To form a golden cross chart pattern, short-term moving average crosses above long-term MA. For most traders, the golden cross pattern represents the pinnacle of technical analysis because it often signifies the start of an uptrend.
There are normally three steps to the golden cross pattern. Although the market is currently in a downward trend for the first stage, it’ll be rapidly reversed due to the increased demand from buyers. After the first drop in Stage 1, the second stage looks for a bull run. The Golden Cross appears whenever the short-term average passes from underneath to above the long-term average, showing that the trend has changed. For the third stage, the fresh upsurge is now stretched until a bull run can be verified. The prices will keep rising as the surge continues.
This classic chart pattern has certain drawbacks while being among the most famous traders. Furthermore, it is a late indicator, which means that it can only be observed after the market has already progressed in its direction. However, this increases the pattern’s reliability. It also means that identifying if a signal is phony or not becomes more difficult due to the latency. As a result, rather than depending only on this pattern, it’s best to use it in conjunction with other signs.