The layout opportunity of the monthly golden cross combined with the daily MACD bottom divergence

A monthly golden cross combined with daily MACD bottom divergence signals a strong bullish reversal in crypto, confirming long-term trend shifts and short-term momentum recovery.

Jul 27, 2025 at 12:42 am

Understanding the Monthly Golden Cross in Cryptocurrency Markets

The monthly golden cross is a long-term bullish signal that occurs when the 50-month moving average crosses above the 200-month moving average on a cryptocurrency’s price chart. This pattern is considered significant because it reflects a shift in long-term momentum from bearish to bullish. In the context of volatile assets like Bitcoin or Ethereum, the monthly golden cross can act as a foundational indicator for macro trend reversals. Traders and investors often view this formation as a signal that a new bull market may be emerging after an extended bear phase. The reliability of this signal increases when it coincides with strong volume and broader market sentiment improvements.

It's important to note that the monthly timeframe smooths out noise, making the golden cross less frequent but more impactful. For example, Bitcoin experienced a monthly golden cross in early 2016, which preceded a substantial bull run. The key is to monitor this crossover not in isolation but in alignment with other technical and macroeconomic factors. When analyzing charts, ensure the moving averages are calculated using closing prices and applied correctly on the monthly candlestick chart.

Daily MACD Bottom Divergence: A Signal of Momentum Shift

The daily MACD (Moving Average Convergence Divergence) is a momentum oscillator used to identify potential reversals. A bottom divergence occurs when the price makes a lower low, but the MACD histogram or line forms a higher low. This indicates that downward momentum is weakening, even if the price continues to fall. In the cryptocurrency market, where sentiment can shift rapidly, detecting this divergence early can offer a strategic entry point before a broader rally.

To identify a daily MACD bottom divergence:

• Apply the standard MACD settings (12, 26, 9) on the daily chart.
• Observe at least two significant price lows.
• Compare the corresponding MACD values at those lows.
• Confirm that the second low in price is lower than the first, but the MACD reading is higher.

This discrepancy suggests that sellers are losing strength. When this happens alongside a monthly golden cross, the confluence of long-term and short-term signals increases the probability of a sustained upward move. The divergence must be clearly visible and confirmed by at least two data points to avoid false readings.

Combining Monthly Golden Cross with Daily MACD Divergence

When the monthly golden cross and daily MACD bottom divergence appear together, they form a powerful multi-timeframe confirmation of a potential bullish reversal. The monthly signal provides the overarching trend direction, while the daily divergence highlights short-term exhaustion in selling pressure. This combination is particularly relevant in cryptocurrency trading, where long-term structural shifts often begin with subtle momentum changes.

For instance, if Ethereum’s monthly chart shows a golden cross after a prolonged consolidation, and its daily chart exhibits a clear MACD bottom divergence near a historical support level, this setup suggests accumulation by smart money. Traders can use this scenario to initiate long positions with tighter risk management. The entry point should be confirmed by a bullish candlestick pattern or a break above a key resistance level on the daily chart.

It is crucial to wait for confirmation. A single green candle is not enough. Look for:

• A close above the 50-day moving average.
• Rising volume on upward price movements.
• Alignment with on-chain metrics such as increasing exchange outflows.

Practical Steps to Identify and Trade This Setup

To effectively utilize this strategy, follow these detailed steps:

• Open a cryptocurrency charting platform such as TradingView and load the monthly timeframe for the asset of interest.
• Add the 50-month and 200-month simple moving averages (SMA) to the chart.
• Check if the 50-month SMA has recently crossed above the 200-month SMA, confirming the monthly golden cross.
• Switch to the daily chart and apply the MACD indicator with default settings.
• Scan for recent price lows and compare the corresponding MACD histogram values.
• Identify a scenario where price makes a lower low but MACD forms a higher low — this is the bottom divergence.
• Wait for a bullish confirmation candle, ideally closing above the previous swing high.
• Set a stop-loss just below the most recent significant low on the daily chart.
• Use a risk-reward ratio of at least 1:3, targeting the next major resistance zone.

Ensure all indicators are applied correctly and avoid using logarithmic scale if precise crossover detection is needed. Backtesting this strategy on historical data for Bitcoin or Binance Coin can help validate its effectiveness.

Common Pitfalls and How to Avoid Them

Even with strong signals, traders can fall into traps. One common error is acting too early. A golden cross may form, but if the daily MACD hasn’t shown divergence, the rally could lack momentum. Another issue is misidentifying divergence — sometimes what appears to be a higher low on MACD is actually flat or slightly lower due to rounding differences. Always zoom in and check exact values.

Market manipulation in crypto can also distort signals. Whales may trigger fake breakouts to trap retail traders. To mitigate this:

• Cross-verify with on-chain data from platforms like Glassnode or CryptoQuant.
• Monitor stablecoin supply ratios and exchange reserves.
• Avoid entering full position at once; use dollar-cost averaging or scaling in.

Additionally, not all golden crosses lead to bull markets. Some result in sideways movement. The presence of daily MACD divergence increases confidence, but confirmation through price action remains essential.

Frequently Asked Questions

What timeframes should I use to confirm the daily MACD bottom divergence?

Use the daily chart with closing prices. Ensure the MACD is set to (12, 26, 9). The divergence should be visible between two distinct price lows, with the second MACD low higher than the first, even if the price is lower.

Can this strategy be applied to altcoins?

Yes, but with caution. Major altcoins like Solana or Cardano may exhibit these patterns, but their liquidity and market depth are lower than Bitcoin. Always verify the golden cross with volume and on-chain activity to reduce false signals.

How do I know if the monthly golden cross is valid?

The cross is valid when the 50-month SMA closes above the 200-month SMA. Use candlestick close values, not intramonth ticks. Confirm with increasing monthly volume and alignment with broader market recovery.

Should I use leverage when trading this setup?

Leverage increases risk, especially in crypto. Given the long-term nature of the monthly signal, it’s safer to use spot positions or low leverage. High volatility can trigger liquidations even during valid reversals.