CoinShares analyst debunks Bitcoin death cross as 'nonsense'

CoinShares head of research James Butterfill called the infamous “Bitcoin death cross” indicator “total nonsense,” citing historical data suggesting that these events often precede positive returns rather than prolonged declines.

Butterfill made the statement in an April 8 post, one day after Bitcoin (BTC) registered a death cross pattern. On April 7, BTC’s 50-day simple moving average (SMA) declined to $86,485.72, falling below the 200-day SMA at $86,839.64.

Assessing 11 past death cross occurrences, Buttefill discovered that BTC usually registers slight losses within one month after the event. However, median and mean values for the following three and six months are positive.

A death cross is a commonly referenced technical signal that indicates potential downward momentum when the 50-day simple moving average falls below the 200-day SMA.

Historical data shows gains rather than collapses

Bitcoin’s returns following past death cross events vary significantly. The dataset includes 11 historical instances dating back to 2011 and measures BTC price changes one month, three months, six months, and 12 months after each previous instance of the event.

One month after a death cross, Bitcoin’s median return was -1.6%, while the average was -3.2%. At the three-month mark, those figures improved to a median of 3.7% and a mean of 13.6%.

Six-month and 12-month returns skewed more favorably, with average returns of 17.0% and 52.3%, respectively, although the median one-year return remained negative at -17.2%.

The divergence in performance highlights the indicator’s inconsistency as a predictive tool. For example, the March 2020 death cross preceded a 450% price increase one year later.

Similarly, the 2011 and 2015 events eventually led to triple-digit returns over the following year, contradicting the signal’s bearish interpretation. Conversely, the 2021 and 2018 death crosses preceded double-digit losses after twelve months.

Butterfill pointed to these mixed results to argue that the pattern lacks empirical reliability. He said:

“For those of you that think the Bitcoin death cross means anything – empirically it’s total nonsense, and in fact often a good buying opportunity.”