The collapse of FTX triggered a historic event for the Bitcoin market. In late November, the hash ribbons indicator signaled the beginning of a second wave of Bitcoin miner capitulation within one cycle. As NewsBTC reported, the hash rate dropped dramatically while 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 already indicated since the beginning of January, the selling pressure has decreased significantly.
For the first time in over four months, miners had been hodling BTC instead of dumping the majority of their coins. The termination of the strong selling pressure from Bitcoin miners is now also confirmed by the hash ribbon indicator.
As the chart below shows, the hash bands are displaying a bullish cross. “Miners have stopped selling and are now plugging in machines at a sufficient rate to declare this period of miner capitulation over,” stated Will Clemente from Reflexivity Research.Bitcoin hash ribbons, Source: Glassnode
What Does This Mean For Bitcoin?
The hash ribbon is a market indicator that assumes BTC tends to hit a 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 over the 60d MA.
In other words: When the hash ribbons indicate a cross, it signifies a paradigm shift. This is historically an extremely good buying opportunity. As Charles Edwards once said, it may be the strongest buy signal of all.
Why? Because the hash rate is a leading indicator for identifying capitulation to mining difficulty. Since the mining difficulty, unlike the hash rate, is not adjusted daily, but only every 2,016 blocks, the difficulty lags behind the hash rate by as much as two weeks.
Therefore, the difficulty is a somewhat lagging indicator of miner capitulation. But difficulty also shows the growing euphoria among miners. Bitcoin initiated a mining difficulty adjustment yesterday at block height 772,128. Mining difficulty climbed 10.26% to 37.59T, a record high.
This also confirms the thesis that miners are increasingly plugging their miners back into the network. The hashrate of the entire network is now 269.02 EH/s, also approaching its highs again. Thus, miners are clearly signaling their bullish sentiment.
The creator of the hash ribbon indicator, Charles Edwards, tweeted:
Hash Ribbon buy confirmed. The signal date was the second lowest price in the last 48 days. Our December newsletter: ‘a price low typically forms during the capitulation and before we see hash rate recover. Sometimes the first candle of the miner capitulation is the price low.’
At press time, Bitcoin was trading at $21,118. On the daily chart, the RSI was at 89, indicating an overbought territory.Bitcoin in overbought territory, 1-day chart | Source: BTCUSD on TradingView.com
Featured image from Michael Fortsch / Unsplash, Chart from TradingView.com