Hash Ribbons Gives Rare Signal to Buy Bitcoin. Will It Work This Time?

For the very first time in 2023 and the very first time in 5 months, a blue signal to purchase Bitcoin from the Hash Ribbons indication has actually flashed. Historically, this signal has high performance and is straight associated to the health of the Bitcoin network along with the activity of miners.

In spite of this, the Hash Ribbons purchase signal is not foolproof. Till late 2021, it appeared nearly difficult to lose when purchasing Bitcoin after this signal fired. Not just did the rate appear to constantly increase after this signal, however BTC was likewise expected to never ever once again drop listed below the low that right away preceded this signal.

As we will see in the analysis listed below, the 2022 bear market shattered this misconception. It ended up that the previous year’s decreases led the cost to levels listed below the lows associated with the blue signal from Hash Ribbons on 2 celebrations.

The other day, the buy signal flashed once again. Will it work this time, as it has generally operated in the past, and will BTC never ever once again drop listed below the bottom at $15,479 set on November 21, 2022?

Bitcoin Network Hash Rate Reaches New Peaks

The Hash Ribbons indication is based upon the hash rate, which is an essential sign of the efficiency of the Bitcoin network. Hash rate represents the quantity of calculating power that all BTC miners are presently creating.

Remarkably, regardless of the substantial decreases in the cost of BTC and the reality that as just recently as November it was 77% listed below its all-time high (ATH), the network’s computing power has actually been growing for the majority of 2022. A substantial boost of the hash rate was observed in the very first 2 weeks of 2023.

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As an outcome, the sign’s 14-day moving average has actually simply tape-recorded a brand-new all-time high (270 EH/s), regardless of the reality that the BTC cost is presently at levels of the 2017 booming market peak (13 EH/s). The present computing power of the Bitcoin network today is more than 20x higher than 5 years earlier. The rate of Bitcoin is nearly similar: around $20,000.

Bitcoin Mean Hash Rate
Chart by Glassnode

What is Hash Ribbons?

Hash Ribbons are based upon the relationship in between the 2 moving averages (SMAs) of the hash rate indication: the 30-day SMA and the 60-day SMA. In addition, the indication describes the 10-day and 20-day moving averages of the BTC rate. In a nutshell, the generation of a blue buy signal earnings in 3 phases:

  1. Miners capitulation: 30D SMA falls listed below 60D SMA, and the Hash Ribbons chart reddens.
  2. End of capitulation: 30D SMA increases above 60D SMA, the green dot illuminate, and the Hash Ribbons chart ends up being green.
  3. Healing of BTC rate momentum: 10D SMA of Bitcoin rate increases above 20D SMA, blue dot illuminate with a signal to purchase.

In the chart below, we see all the circumstances when the Hash Ribbons purchase signal has actually flashed given that 2015. It deserves including that prior to 2015, the signal flashed a couple of times, however the returns were so big that we do not include them in this analysis.

BTC/USD chart by Tradingview

Historic Returns After Hash Ribbons Signal

One analysis of the buy signal from Hash Ribbons is that the Bitcoin rate bottom is produced right away prior to the signal is a macro market bottom. To put it simply, the BTC rate must no longer drop listed below the lows seen prior to the signal.

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This analysis– although primarily precise– has actually currently been falsified 3 times in the last couple of years (orange arrows). This took place for the signals of December 2019, and August 2021, and the previous signal of August 2022. In each of these cases, the BTC rate decreased (two times in 2022) listed below previous lows.

In the staying 7 out of 10 historic cases, the buy signal from Hash Ribbons was undoubtedly an indication of the macro bottom of the Bitcoin cost (red circles). Even in the 3 cases where this did not occur, the BTC rate at first rose.

Hence, if one wished to compute all the boosts from the 10 previous signals and after that balance them, the outcome is 557%. That’s just how much Bitcoin increased usually from the bottom preceding the signal from Hash Ribbons to the top of the booming market or the next signal. If BTC were to presently increase by 557%, determined from the bottom at $15,479 (green circle), it would cost $101,697 at the peak of the approaching booming market.

BTC Bullish sign
BTC/USD chart by Tradingview

Has Bitcoin Reached a Macro Bottom?

On January 14, 2023, the buy signal from Hash Ribbons flashed once again. If the historic efficiency of the indication is sustained this time, it might offer more verification that the macro bottom of the BTC cost has actually currently been reached. In this case, it would be the $15,479 level (green line).

BTC Hash ribbon sign
BTC/USD chart by Tradingview

Hash Ribbons sign developer @caprioleio tweeted the other day that “a rate low generally types throughout the capitulation and prior to we see hash rate recuperate.” If so, then, as in lots of historic cases, the capitulation of Bitcoin miners would associate with a macro bottom in the BTC cost.

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Hash Ribbon purchase validated. The signal date was the 2nd least expensive rate in the last 48 days. Our December newsletter: “a rate low normally types throughout the capitulation and prior to we see hash rate recuperate. In some cases the very first candle light of the miner capitulation is the rate low.” https://t.co/cjj9wXQNtM

— Charles Edwards (@caprioleio) January 15, 2023

On the other hand, the ruthless bearish market of 2022 revealed that no single sign can be blindly relied on. Both on-chain analysis, technical signs, and cost action in the previous year have actually unmasked a lot of the misconceptions surrounding Bitcoin and the cryptocurrency market.

Will Hash Ribbon restore its track record or stay simply a historic interest? The next couple of months will offer the response.

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