Charles Edwards, the mastermind behind the Bitcoin Hash Ribbons signal and founder of Capriole Investments, has sounded the alarm. The renowned analyst warns that the Hash Ribbons capitulation signal just flashed, a phenomenon historically associated with moments of distress for BTC miners.
As outlined by Edwards, by 2023 Bitcoin’s hash rate had experienced an astonishing and seemingly unsustainable 50% increase. However, this rapid rise came to a sudden slowdown, which led to the Hash Ribbons capitulation signal appearing. Via Twitter, Edwards emphasized that the signal is neither a clear sell signal nor a buy indicator. But it requires prudent risk management until a renewed price rally:
We have a Hash Ribbon capitulation. In other words, a slowdown in Bitcoin’s Hash Rate growth after an incredible (unsustainable) 50% increase in 2023. The capitulation of Hash Ribbons is not a sell signal, but it’s not bullish either. Risk management warranted until growth picks up again.
Market analyst Lukasz Wydra confirms Edwards’ position to point that the death cross of Bitcoin hash ribbons is a signal of a time of uncertainty. Wydra revealed that historically there have been 14 similar events, each leading to different outcomes. Of these events, three resulted in rallies, six led to sideways movements, and five caused falls.
Wydra takes a statistical approach and assures investors that the capitulation of Hash Ribbons does not statistically cause significant damage to the market. He even emphasizes that when the capitulation finally wears off, it will usher in a strong buy signal, one that has proven remarkably effective in the past.
The last time the Hash Ribbons capitulation signal appeared was in late November 2022. It was followed by a prolonged sideways trend for over a month until the buy signal flashed in early January. The result? Bitcoin embarked on a furious rally and made a memorable start to the year.
Why Bitcoin Hash Ribbons are such a powerful tool
Simply put, the Hash Ribbon indicator is designed to detect periods when BTC miners are facing problems and possible capitulation. These phases usually coincide with major lows in Bitcoin’s price, making them attractive buying opportunities for savvy investors.
Miners play a vital role in securing the Bitcoin network and processing transactions. During periods of rapid price increases followed by sharp downturns, some miners may find it financially challenging to continue their operations, forcing them to shut down their mining rigs.
Charles Edwards explains that when miners capitulate, it is perhaps the most powerful buy signal observable in the Bitcoin market. However, the indicator does not claim to time the exact bottom of the price. Instead, it identifies periods when miners shut down their rigs due to adverse market conditions, leading to drops in hash rates.
These moments often correspond to macro bottoms in Bitcoin’s price, making them suitable times to accumulate Bitcoin.
At the time of writing, BTC was trading near the lows of the range at $29,863.
Featured image from iStock, chart from TradingView.com
