For the first time in 2023 and for the first time in 5 months, the Hash Ribbon indicator has flashed a blue signal to buy bitcoin. Historically, this signal has a high efficiency and is directly related to the health of the bitcoin network as well as the activity of miners.
Nevertheless, the Hash Ribbons buy signal is not infallible. By the end of 2021, it seemed almost impossible to lose when buying bitcoin after the close of this signal. Not only does the price always seem to be rising after this signal, but BTC should never have dropped below the low immediately prior to this signal.
However, as we will see in the analysis below, the 2022 bear market busted this myth as well. It turns out that last year’s decline led the price to trade below the low level correlated with the blue signal from the Hash Ribbon on two occasions.
Yesterday, the buy signal flashed again. Will it work this time, as it usually has in the past, and won’t BTC fall again below the low of $15,479 on November 21, 2022?
Bitcoin network hash rate reaches new peak
The Hash Ribbon indicator is based on the hash rate, which is a fundamental indicator of the performance of the bitcoin network. The hash rate represents the amount of computing power that all BTC miners are currently generating.
Interestingly, the computing power of the network has been increasing for most of 2022, despite the massive drop in BTC price and the fact that it was 77% below its all-time high (ATH) as recently as November. Hash rate seen in the first two weeks of 2023.
As a result, the indicator’s 14-day moving average just registered a new all-time high (270 EH/s), despite the fact that BTC price is currently at the level of the 2017 bull market peak (13 EH/s). , The current computing power of the bitcoin network is 20 times greater today than it was five years ago. The price of bitcoin is roughly the same: around $20,000.
What is hash ribbon?
The Hash Ribbons are based on the correlation between two moving averages (SMAs) of the hash rate indicator: the 30-day SMA and the 60-day SMA. Furthermore, the indicator refers to the 10-day and 20-day moving averages of the BTC price. Briefly, the generation of the Blue Buy signal proceeds in 3 steps:
Miners Capitulation: The 30D SMA breaks below the 60D SMA, and the Hash Ribbon chart turns red.
End of Surrender: The 30D SMA rises above the 60D SMA, the green dot lights up, and the hash ribbon chart turns green.
BTC Price Momentum Recovery: 10D SMA of bitcoin price rises above 20D SMA, blue dot lights up with buy signal.
In the chart below, we see all the instances when the Hash Ribbon buy signal has flashed since 2015. It is worth adding that before 2015, the signal flashed a few times, but the returns were so large that we do not include them here. Analysis.
historical return after hash ribbon signal
One interpretation of the buy signal from the Hash Ribbon is that the bottom of bitcoin’s price is generated just before the signal is at the bottom of the macro market. In other words, the price of BTC should no longer fall below the lows seen before the signal.
This interpretation – although mostly accurate – has already been proven wrong 3 times over the years (orange arrow). This happened for the December 2019 and August 2021 signs, and the previous signs for August 2022. In each of these cases, the price of BTC fell below the previous lows (twice in 2022).
However, in 7 of the remaining 10 historical cases, the buy signal from the Hash Ribbon was actually indicative of a macro bottom of the bitcoin price (red circles). Furthermore, even in the 3 cases where this did not happen, the price of BTC initially increased.
Thus, if one were to calculate all the gains from the 10 previous signals and then average them, the result is 557%. How much has bitcoin risen on average from the top of the bull market or the next signal before the signal from the Hash Ribbon. If BTC were to increase by 557% from its current bottom, measured at $15,479 (green circle), it would be priced at $101,697 at the peak of the upcoming bull run.
Has Bitcoin Hit Macro Bottom Yet?
The buy signal from the Hash Ribbon reappeared on January 14, 2023. If the indicator’s historical performance holds up this time, it could provide further confirmation that the macro bottom for BTC price has already been reached. In this case, it would be the $15,479 level (green line).
hash ribbon pointer maker @caprioleio tweeted yesterday that “low prices usually form during capitulation and before we see the hash rate recover.” If so, then, as has been the case in many historical cases, the dedication of bitcoin miners will correlate with a macro bottom in BTC price.
On the other hand, the brutal bear market of 2022 showed that no single indicator can be blindly trusted. Both on-chain analysis, technical indicators and price action have debunked many of the myths surrounding bitcoin and the cryptocurrency market over the past year.
Will the Hash Ribbon regain its reputation or remain just a historical curiosity? The next few months will answer this.
For the latest crypto market analysis from BeInCrypto, click here,
disclaimer
BeInCrypto endeavors to provide accurate and up-to-date information, but shall not be responsible for any missing facts or incorrect information. You comply and understand that you should use any of this information at your own risk. Cryptocurrencies are highly volatile financial assets, so do your research and make your own financial decisions.