Bitcoin Hash Ribbon’s “Buy Zone” Significantly Intensifies Since March

In March, the price of Bitcoin plunged by more than 50% to below $3,600. Since then, the dominant cryptocurrency has rallied by 197% to $10,700. At its yearly peak in August, BTC rose to as high as $12,500 across major exchanges.

Since March, a “buy zone” signal of the Bitcoin hash ribbon indicator has been a persistent BTC catalyst. The historically accurate macro on-chain indicator is hinting an uptrend for BTC again, after first lighting up in March.

In an interview, on-chain analyst Willy Woo explained that the hash ribbon has been in the “buy zone” since March. It recently broke out of the zone, suggesting that a broader uptrend could occur.

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What The Hash Ribbon Indicator Is And Why It’s Significant For Bitcoin Price

Bitcoin is widely perceived as a store of value and a currency. Jack Dorsey, the CEO of Twitter and Square SQ , said he sees BTC becoming the world’s sole currency by 2030.

Under that is a blockchain network that is maintained by computing power contributed by miners. The amount of computing power supporting the Bitcoin blockchain is a highly important metric to measure the blockchain’s fundamental strength.

The amount of computing power on Bitcoin is called hashrate. If the hashrate increases, it suggests that more miners are contributing computing power to the blockchain. 

The basic theory of the hash ribbon indicator is that a Bitcoin bull cycle begins when miners capitulate. The term capitulation refers to when miners sell a significant amount of BTC, or smaller miners get shaken out. Capitulation could occur when the price of Bitcoin is too low for mining to be profitable.

When capitulation occurs, there is lower external selling pressure on Bitcoin. That raises the probability of a more stable BTC uptrend in the medium term.

“Because of the effect of negative sentiment and price action during deep bear markets and times of miner capitulation, the best time to buy Bitcoin is typically somewhere in the middle of the ‘miner capitulation’ period,” Charles Edwards, the creator of the hash ribbon indicator, explains.

Recently, the hash ribbon indicator, which has been in a buy zone for six months, broke out. It is essentially signaling that a prolonged Bitcoin rally could come next, based on miner capitulation cycles.

“Bitcoin Difficulty Ribbon Compression is trending up and broke out of the green buy zone for the first time since March. Historically, these have been periods characterized by a positive momentum indicating significant BTC price increases,” analysts at Glassnode said.

Hashrate Continues To Increase, Indicating Market Strength

According to the data from Blockchain.com, the hashrate of the Bitcoin blockchain network is continuously increasing to record highs.

The rising hashrate fuels hashrate-based on-chain indicators, which include the hash ribbon indicator.

The all-time high Bitcoin hashrate is particularly optimistic this time around because it comes off a halving.

In May, the third block reward halving in Bitcoin history occurred. It decreased the amount of BTC miners could mine by half, cutting miner revenues by 50%, exclusive of fees.

After a halving, if Bitcoin’s price does not increase substantially, it becomes less profitable to mine. As such, the hashrate drops, and the overall blockchain network health can subside.

However, in the most recent post-halving cycle, hashrate barely dropped and has hit record highs consistently ever since.

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