A key indicator of miner activity suggests that Bitcoin may have hit a local bottom. So what is it really and what else for the number 1 crypto on the market?
The activity of the miners was closely observed
The bear market continues and many investors are looking for a bottom for the king of cryptocurrencies. Since the ATH last November at nearly $69,000, Bitcoin has lost more than 60% of its value. It’s even worse for most asset markets that are having a hard time.
Recently, the total capitalization of the crypto market fell below a trillion dollarswhich shows the weakness of the crypto market.
Many observers have gone through all the possible metrics and indicators for try to determine the famous bottom. In this quest, the indicators related to minors are particularly considered. When the market falls, miners may be forced to sell their production and reduce their activity.
to look, minor activity we generally use the “hash rate“. This indicator measures the computing power used to mine BTC. Since the recent market crash last May, we notice a constant decrease in the average hash rate over 30 days. Sometimes it even reached 10%.
If this indicator is scrutinized in particular, it is because it has often been successfully determined bottom of the market. In fact, when it falls and the miners reduce their activity, we are generally close to capitalization. An analyst at CoinShares, Matthew Kimmell, clarifies:
Historically, miner capitalization has often coincided with the bottom of the crypto market.
Hash ribbons to the rescue?
Starting from the hash rate, Charles Edwards, the founder of a crypto fund named Capriole Investissements, created hash ribbons in 2019. These ribbons should make it easy to determine the various opportunities to purchase the asset.
So when the 30-day moving hash rate falls below the 60-day moving average, this is a bearish crossover. We see here, a decrease in the activity of the miners which indicates a downward movement.
Conversely, when the 30-day moving average of the hash rate exceeds 60 days, we are crossing bullish. It is believed here that the worst part of the movement is behind us and that the capitalization of the miners has taken place. Furthermore, if this happens when the 10-day moving average of BTC price crosses more than 20 days, we are on a buy signal.
Such a situation was seen next Saturday. If we rely on past performance, although this cannot predict future performance, we note that BTC purchases were generated at these strategic positions large production.
For example, an investor would understand following this buy signal in August 2016 and resell at the 2018 peak. 3000% performance.. Incredible performance even if it is difficult to imagine that the bottom and the top of the market will be known !
Edwards says of hash ribbons:
I created hash ribbons in 2019 as a way to see a big BTC mining selloff. In fact, once the recovery comes in after these events, they usually mark the bottom for bitcoin price. Historically, these times have been great times to invest in bitcoin, with impressive returns.
This metric, along with various indicators, can be a valuable ally in terms of investment. However, this indicator alone is not enough…
Soon Bitcoin Rush?
To go further, Coinshares revealed a graph linking hash rate and BTC price. This indicator highlights different color zones including one called Gold Rush or gold rush in French.
Coinshares believes that we are currently in destocking period. This step precedes a rebalancing and resume price increase. It is the famous gold rush, as seen in previous periods.
Other experts seem to share this view of miners’ capitalization indicating a potential bottom for Bitcoin. However, the care is still in order. The traditional and crypto markets were very much the talk of the Fed last Friday.
Economic conditions remain weak with galloping inflation or even a real estate crisis in China. Besides, the past cannot be relied upon to predict the future. This is even more true in the financial markets. The coming weeks and months will tell us more on the direction Bitcoin will take and with all the crypts.
To learn more about September Bitcoin predictions, find our article here.