Metric analysis

Bitcoin mining metric that predicted every big BTC rally since 2020 flashes again

A Bitcoin mining (BTC) indicator that preceded several large BTC price hikes is flashing again.

Blockchain analysis platform Glassnode has spotted a golden cross between the 30-day and 60-day moving averages of Bitcoin’s hash ribbon. In theory, such a cross indicated that the price dynamics go from negative to positive.

Bitcoin hash ribbons. Source: Glassnode

Hash ribbons are based on the behavior of Bitcoin’s network hash rate and are designed to indicate to investors when the price should rise. Simply put, they show when Bitcoin becomes more expensive to mine compared to the base cost of mining.

Miners earn less in terms of US dollars during Bitcoin price corrections. So, to pay their operational costs, they sell their newly created Bitcoin to raise capital. They also tend to shut down machines to reduce their operating costs, causing the hash rate in the Bitcoin network to drop.

But hash rates recover later thanks to Bitcoin’s automatic difficulty readjustments. This lowers the cost of mining and makes it cheaper to enter the fray for less efficient miners. In doing so, the miners also accumulate coins, thus ending the period of surrender.

Therefore, the hash ribbons demonstrate the sentimental passage of the miners from surrender to accumulation. This provides traders with a method of determining potential low prices in the spot market.

Hash Ribbon Fractals Predict Bitcoin Bull Races

Recent history has shown that the price of Bitcoin has followed the signals of the hash ribbon.

For example, the chart below illustrates several instances where a cross between the 30-day (green) and 60-day (blue) hash ribbon moving average prompted Bitcoin bulls to continue to move higher.

For example, the so-called supply squeeze event in December 2020 coincided with the crossing of the green-blue moving average. The closing bid for Bitcoin this month was $ 28,990, which jumped to $ 62,971 on April 14.

The Bitcoin hash ribbon crosses in recent history. Source: Glassnode

Likewise, the 2019 bear surrender, the January 2020 mini-bear cycle, the March 2020 coronavirus-induced crash, and the May halving event all occurred alongside the crossover of the mean. green-blue mobile. Each was followed by a bullish movement in the Bitcoin market.

The recent bullish cross came as part of what Glassnode called the ‘great migratory upturn’. In detail, China’s crackdown on the crypto industry in May forced regional miners to shut down. Some have decided to shut down completely under Beijing’s regulatory oversight, while others have moved their mining operations overseas.

Related: Bitcoin Mining Difficulty Increases A Second Time As Miners Settle Off

The period of exodus from the Chinese mining community saw Bitcoin’s hash rate drop from 180.66 million terrahashes per second (TH / s) on May 11 to 84.79 million TH / s in July, a decrease of more than 53%.

But by August 17, the hash rate had dropped back to TH119.12 million / s, as miners moved their operations to Canada, Kazakhstan, Russia and the United States.

“Historically, 30D hash tape has gone above 60D when the worst of the mine impact has passed and recovery is underway,” Glassnode noted.

Bitcoin was trading near $ 45,200 at the time of writing, up 55% from its July 20 low of $ 29,301.

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