In his latest message, Charles Edwards, CEO of digital asset and bitcoin hedge fund Capriol, said Putting a mark It is an important indicator for the market in the latest edition of the company's newsletter, Update No. 51. Edwards points to the activation of the “Hash Ribbons” buy signal, a notable event that has historically signaled major buying opportunities for Bitcoin.
Flash buy signal for bitcoin hash strips
The Hash Ribbons Index, first introduced in 2019, uses mining data to predict long-term buying opportunities based on the economic pressures miners face. The signal arises from the convergence of the short-term and long-term moving averages of the Bitcoin hash rate, specifically when the 30-day moving average falls below the 60-day moving average. According to Edwards, this event “in the vast majority of cases was concurrent with broader Bitcoin market weakness, price volatility, and significant long-term value opportunities.”
The current miner capitulation, as Edwards explained, began two weeks ago and coincides with post-halving adjustments in the mining sector. This period often leads to the closure of operations and even bankruptcy among less efficient miners. “Just as we see today, these mining rigs typically phase out over several weeks after the halving resulting in lower hashrates,” Edwards notes.
Despite the historical profitability of miners, especially with increasing block fees from new applications such as Ordinals and Runes, Edwards suggests that the market should not ignore the current opportunity indicated by the recent capitulation of miners. “Although this capitulation is occurring when miners have been making profits at scale, we would be remiss if we did not notice this rare opportunity,” Edwards said.
Related reading
Hash Ribbons have not been without their detractors, with each event sparking debate about how relevant and accurate the signal is today. Edwards addressed these criticisms by pointing to the previous year's signal, which was associated with Bitcoin trading in the $20,000 range, which strengthened the predictive power of the indicator. “Each event raises some debate about how significant it is today, or why the current signal might not be significant,” Edwards explained.
Edwards recommends that the safest approach to profiting from hash bars is to wait for confirmation through renewed hash rate growth and a positive price trend. He concludes, “The safest (lowest chance of volatility) allocation to the Hash Ribbons strategy is a hash bar buy confirmation that is triggered by a rolling hash rate growth (30DMA > 60DMA) and a positive price trend (as defined by the 10DMA > 20DMA price).”
Broader market context
Moving from the technical to the contextual, Edwards discusses the changing regulatory landscape that has recently become more favorable to cryptocurrencies. The SEC's approval of the exchange-traded fund, which classifies ETH as a commodity, represents a major shift in the regulatory approach to cryptocurrencies and reflects growing institutional acceptance.
Related reading
“The reclassification of Ethereum and the approval of its ETF represent a pivotal shift in the government’s stance toward cryptocurrencies,” Edwards notes. “This could lead to increased institutional participation and potentially more stability in cryptocurrency markets.”
Furthermore, Edwards points to macroeconomic factors that can affect Bitcoin's value. The expansion of the M2 money supply and the Fed's stance on interest rates are designed to stimulate economic activity. However, Edwards warns of the potential long-term consequences of these policies, such as inflation, which could enhance Bitcoin's appeal as a hedge against currency depreciation.
“Bitcoin was envisioned as an alternative to traditional financial systems in times of economic stress,” says Edwards. “Current economic policies reinforce Bitcoin’s core raison d’être and could lead to increased adoption.”
On the technical front, Edwards provides analysis of Bitcoin price movements, highlighting the recent breakout and consolidation above critical resistance levels. He set a conditional medium-term price target of $100,000, provided the market sustains its current momentum and the monthly close stays above the critical threshold of $58,000.
At press time, Bitcoin was trading at $69,008.
Featured image created with DALL·E, chart from TradingView.com