The collapse of FTX triggered a historic event for the Bitcoin market. In late November, the hash ribbons indicator signaled the start of a second wave of Bitcoin miner capitulation within one cycle. Like NewsBTC reportedthe hash rate dropped dramatically as some of the largest miners reported bankruptcy and dumped their BTC holdings on the market.
However, this poor state of the Bitcoin mining industry and the associated pressure on the Bitcoin price may have come to an end. As the net position change of miners since the beginning of January indicated, the selling pressure has eased considerably.
For the first time in over four months, miners had hobbled BTC instead of dumping most of their coins. The end of strong selling pressure from Bitcoin miners is now also confirmed by the hash ribbon indicator.
As the chart below shows, the hash bands are showing a bullish cross. “Miners have stopped selling and are now plugging in machines enough to declare this period of miner capitulation over,” mention Will Clemente of Reflexivity Research.
What does this mean for Bitcoin?
The hash ribbon is a market indicator that assumes that BTC tends to bottom when miners capitulate. Currently the hash ribbons indicate that the worst of the miner capitulation is over as the 30-day MA of the hash rate crossed the 60d MA.
In other words: When the hash ribbons indicate a cross, it means a paradigm shift. This is historically an extremely good buying opportunity. Like once Charles Edwards saidthis may be the strongest buy signal of all.
Why? Because the hash rate is a leading indicator for identifying capitulation to mining problems. Since the mining difficulty, unlike the hash rate, is not adjusted daily, but only every 2,016 blocks, the difficulty lags the hash rate by as much as two weeks.
Therefore, difficulty is a somewhat lagging indicator of miner capitulation. But the difficulty also shows the growing euphoria among miners. Bitcoin started yesterday an adjustment to my difficulty at block height 772.128. Mining difficulty increased by 10.26% to 37.59T, a record high.
This also confirms the statement that miners are increasingly reconnecting their miners to the network. The hashrate of the entire network is now 269.02 EH/s and is also approaching its peak. Miners therefore clearly give their signal bullish feeling.
The creator of the hash ribbon indicator, Charles Edwards, tweeted:
Hash Ribbon purchase confirmed. The signal date was the second lowest price in the last 48 days. Our December Newsletter: “a low price usually arises during the capitulation and before we see the hash rate recover. Sometimes the first candle of the miner capitulation is the low price.”
At the time of writing, Bitcoin was trading at USD 21,118. On the daily chart, the RSI was at 89, indicating an overbought area.
Featured image by Michael Fortsch / Unsplash, chart from TradingView.com