What are Crypto Moving Averages?
Crypto moving averages are one of the most basic tools in technical analysis, but they're also some of the most widely used.
You'll find them on pretty much every crypto charting platform, and traders use them to identify trends, spot potential support and resistance levels, and understand whether an asset's price is moving above or below its recent average.
You'll often hear traders talk about the 20-day, 50-day, or 200-day moving average when discussing Bitcoin or other cryptocurrencies. But what do these numbers actually mean, and how can you use moving averages when trading crypto?
What is a moving average in crypto?
A moving average is an indicator that smooths out price data by calculating the average price over a specific number of periods.
The "moving" part comes from the fact that the calculation changes as new price data comes in. For example, a 20-day moving average looks at the average price over the most recent 20 days. When a new day is added, the oldest day drops out of the calculation and the new day is included.
This creates a line that moves along with the price but is generally smoother and less volatile than the price itself.
Moving averages are particularly useful in crypto because prices are volatile. A Bitcoin price chart can move thousands of dollars in a single day, making it difficult to identify the underlying trend by looking at price alone. A moving average filters out some of that short-term noise.
For example, if Bitcoin is trading above its 200-day moving average, a trader might view that as evidence that the longer-term price trend is relatively strong. If it's trading below the 200-day moving average, they may interpret the longer-term trend as weaker.
There are two main types of moving averages you'll encounter:
Simple moving average (SMA): gives each price point equal weight.
Exponential moving average (EMA): gives more weight to recent prices, so it reacts faster to changes in price.
The choice between them depends on what you're trying to measure. An EMA will generally respond more quickly to a sudden change in price, while an SMA produces a smoother line.
How are moving averages calculated?
A simple moving average is calculated by adding together the closing prices for a set number of periods and dividing the result by the number of periods.
For example, a five-day SMA would add the five daily closing prices together and divide them by five. If the closing prices were $90, $92, $91, $95, and $97, the five-day SMA would be $93.
Once another day of data becomes available, the oldest price drops out, and the new price enters the calculation.
An EMA uses a more complicated calculation that gives greater weight to recent prices. This means an EMA will usually move closer to the current price than an equivalent SMA.
Fortunately, you don't need to calculate either manually. Crypto charting platforms do it automatically.
How to use moving averages in crypto trading
There are several ways traders use moving averages when analysing crypto.
Identifying trends
The most straightforward use is identifying the direction of the trend. If the price is consistently above a rising moving average, it can suggest that the market is trending upwards. If the price is consistently below a falling moving average, it can suggest a downward trend.
The slope of the moving average can also be useful. A rising 50-day moving average tells you something different from a flat 50-day moving average, even if the price is above both.
Finding potential support and resistance
Moving averages can sometimes act as dynamic support or resistance.
For example, Bitcoin might repeatedly find buyers when it pulls back towards its 50-day moving average during an uptrend.
In a downtrend, the same moving average might act as resistance, with the price repeatedly struggling to move back above it.
This isn't guaranteed, though. Moving averages aren't physical barriers. They're simply levels used in crypto technical analysis, and their significance can change depending on the market and timeframe.
Spotting crossovers
Another common strategy is watching when two moving averages cross.
A bullish crossover occurs when a shorter-term moving average crosses above a longer-term moving average, while a bearish crossover happens when a shorter-term moving average crosses below a longer-term moving average.
One of the best-known examples is the golden cross, where a 50-day moving average crosses above the 200-day moving average. The opposite is known as a death cross, where the 50-day moving average crosses below the 200-day moving average.
These are widely followed by investors, but they are lagging indicators. By the time a crossover appears, the price has already moved.
Using multiple moving averages
Traders don't have to choose just one.
A chart might contain a 20-day, 50-day, and 200-day moving average at the same time.
Looking at all three can give you a sense of short-, medium-, and long-term price trends. For example, if Bitcoin is above all three and all three are rising, the overall trend is stronger than if Bitcoin is above its 20-day average but below its 200-day average.
What are the best moving averages for crypto?
There's no single "best" moving average for every crypto trader.
Different periods are useful for different timeframes and strategies. A short-term trader might care more about the 9-day or 20-day EMA, while a longer-term investor might pay more attention to the 50-day or 200-day moving average.
Some of the most commonly watched crypto moving averages include the 20-day, 50-day, 100-day, and 200-day.
20-day moving average
The 20-day moving average is useful for looking at short- to medium-term trends. Because it only considers the previous 20 days, it reacts relatively quickly to changes in price.
Traders might use it to monitor short-term momentum or identify potential support during a strong trend. A 20-day EMA will react even faster than a 20-day SMA, which can make it more useful for traders who want a more responsive indicator.
50-day moving average
The 50-day moving average is one of the most commonly watched medium-term indicators. It gives traders a longer view of the trend than the 20-day moving average without being as slow as the 200-day.
The 50-day moving average is also important because of its use in the golden cross and death cross. For example, if Bitcoin's 50-day moving average crosses above its 200-day moving average, traders may refer to this as a golden cross.
100-day moving average
The 100-day moving average sits between the 50-day and 200-day averages. It isn't as universally watched as the 50-day or 200-day, but it can be useful for traders looking for a medium- to long-term view of the trend.
Some traders use it as another potential support or resistance level or as a way to filter out shorter-term market noise.
200-day moving average
The 200-day moving average is one of the most widely followed long-term indicators in crypto and traditional markets. Because it covers roughly 200 trading days, it moves much more slowly than shorter-term averages.
Traders often use it to identify broader market trends. For example, Bitcoin trading above a rising 200-day moving average can be interpreted as a sign of a longer-term uptrend. A sustained move below a falling 200-day moving average can suggest that the longer-term trend has weakened. The 200-day moving average is also the longer-term component of the golden cross and death cross.
9-day and other short-term moving averages
Shorter moving averages such as the 9-day can be useful for traders focused on short-term price movements. Because they react quickly to new data, they can provide earlier signals when momentum changes.
The trade-off is that they can also produce more noise and false signals. A 9-day moving average might react to a sudden Bitcoin price spike that has little impact on the longer-term trend, while a 200-day moving average is much less likely to move significantly because of one day's price action.
What is crypto MACD?
MACD stands for Moving Average Convergence Divergence. It's a momentum indicator that uses moving averages to measure changes in the strength and direction of price momentum.
MACD is usually calculated using two exponential moving averages:
A 12-period EMA
A 26-period EMA
The 12-period EMA is subtracted from the 26-period EMA to create the MACD line.
A 9-period EMA of the MACD line is then used to create the signal line. The difference between the MACD line and signal line is shown as a histogram.
Traders often look for the MACD line to cross the signal line. When the MACD line crosses above the signal line, it can indicate increasing bullish momentum. When it crosses below the signal line, it can indicate increasing bearish momentum.
As with other technical indicators, these aren't guaranteed signals. MACD is based on historical price data and can lag behind sudden market moves.
What does divergence from the moving average indicate?
Divergence usually refers to a situation where the price and an indicator are moving in different directions. It doesn't normally mean that the price has simply moved away from a moving average.
For example, suppose Bitcoin makes a new high, but MACD makes a lower high.
That's a bearish divergence.
It can suggest that bullish momentum is weakening even though the price is still making higher highs.
A bullish divergence is the opposite: the price makes a lower low while the indicator makes a higher low.
This can suggest that bearish momentum is weakening.
Traders can look for these divergences using MACD, RSI, and other momentum indicators.
What does convergence from the moving average indicate?
Convergence means that two lines or measurements are moving closer together.
In MACD, convergence refers to the MACD line and signal line moving closer together.
For example, if the gap between the two lines is getting smaller, it means the difference between the short- and longer-term EMAs is narrowing.
This can happen when momentum is weakening or when the direction of the trend is changing.
It's also worth separating this from the concept of a moving average crossover. When the MACD line crosses the signal line, the two lines have converged and then moved past one another. Traders often use this crossover as a potential momentum signal.
Moving averages vs other technical indicators
Moving averages are useful because they're simple, but they only tell you part of the story.
They are primarily trend-following indicators. They can help you understand the direction of a market, but they don't tell you everything about momentum, volatility, or trading volume.
That's why traders often combine them with other indicators.
Moving averages + RSI: Moving averages can help identify the overall trend, while RSI can provide information about momentum and potentially overbought or oversold conditions.
Moving averages + MACD: Both use moving averages, but MACD is designed to identify changes in momentum and trend strength.
Moving averages + volume: Price moving above a moving average on strong trading volume can provide different context from the same move occurring on very low volume.
Moving averages + support and resistance: A moving average can act as dynamic support or resistance, while horizontal price levels can identify areas where the market has previously struggled to move higher or lower.
The advantage of combining indicators is that you can look at the same market from different angles, but adding more indicators doesn't automatically make an analysis more accurate. Many technical indicators are based on the same underlying price data, so adding different indicators can sometimes just give you multiple versions of the same information.
Are moving averages useful for crypto?
Moving averages can be a useful way to cut through some of crypto's short-term volatility and get a clearer view of the underlying trend.
Shorter averages such as the 9-day and 20-day can react quickly to price changes, while the 50-day, 100-day, and 200-day averages provide progressively longer-term views. But moving averages are also lagging indicators. They are calculated from past prices, so they don't predict the future.
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