Shaurya Malwa · 5 days ago · 2 min read
Bitcoin › Analysis
Analyst: Hash rate signal that preceded Bitcoin’s recent 100% rally will soon appear
The Bitcoin hash rate dove strongly in late October. The metric, which tracks how much computational power is being used to mine BTC, fell from approximately 170 exahashes to a low near 90 exahashes per second.
Bitcoin transactions subsequently became slow as block times naturally increased.
Worrying some investors, the “Hash Ribbons,” a custom indicator that tracks movements in the hash rate, had printed a “capitulation” signal for the first time since the halving. Seeing that Bitcoin had just surged toward $15,000, a signal that often appears in bear markets or after halvings had no right showing up once again.
But according to the creator of the indicator, Charles Edwards, there is little to be worried about.
Bitcoin Hash Ribbons may soon print a “buy”
According to Edwards, the Hash Ribbons are about to print a “buy” signal in the coming weeks.
The Bitcoin hash rate has bounced 60-70 percent from the local lows, recovering as Chinese miners finish accounting for the end of the wet season, and thus the end of extremely cheap hydroelectricity.
Looks like we will get another Hash Ribbon Buy in November.
Hash Rates are recovering perfectly in line with the expected post wet season energy transition in China.
— Charles Edwards (@caprioleio) November 10, 2020
The Hash Ribbons printing a “buy” would mark a win for bulls, according to historical backtesting of the indicator.
For instance, the indicator last printed a “buy” in summer, prior to the rally from the $8,000s to the $16,000 highs where Bitcoin is today.
His analysis has also indicated that the indicator has printed a “buy” at the bottom of all macro bear markets, like the $3,100 lows in 2018, along with similar bottoms in previous market cycles.
Should history rhyme, the Hash Ribbons printing a “buy” should precede a Bitcoin rally to new all-time highs and beyond.
Fundamental trends are also set to drive Bitcoin higher
As reported by CryptoSlate previously, on-chain data and market data shows that “institutional” players are increasingly bidding Bitcoin while investors that already own BTC have become increasingly hesitant to sell. Analyst “Light” commented on this “sell-side liquidity crisis”:
“A lot of the buy pressure that is competing for tightening BTC sell-side liquidity these last weeks is coming from institutionals. They are buying from people who are in the disbelief stage.”
Catalyzing renewed demand for Bitcoin are institutional investors, which are increasingly buying and promoting the leading cryptocurrency.
On Monday, one of the world’s foremost asset managers, Stanley Druckenmiller, revealed that he is long on Bitcoin:
“Bitcoin… has a lot of attraction as store of value to both millennials and new West Coast money… I own many many more times gold than Bitcoin but frankly if the gold bet works the Bitcoin bet will probably work better because it’s thinner, more illiquid and has more beta to it.”
Druckenmiller is widely regarded as one of the world’s best asset managers, having worked for billionaire George Soros and having made billions for himself and his clients running his own fund. His fund famously made an average of 30 percent per year for an extended period of time.
Analysts say that his entrance into the space will catalyze other institutional players, along with retail investors that respect him, to buy Bitcoin.
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