Charles Edwards, the brains behind the Bitcoin Hash Ribbons signal and founder of Capriole Investments, sounded the alarm. The famous analyst warns that the Hash Ribbons capitulation signal may just be flashing, a phenomenon that has historically accompanied moments of distress for bitcoin miners.
As Edwards points out, the Bitcoin hash rate has seen a staggering and seemingly unsustainable 50% surge in 2023. However, this meteoric rise led to a sudden slowdown, which signaled Hash Ribbons’ capitulation. Via Twitter, Edwards confirmed The signal is neither a clear sell signal nor a buy signal. But it requires prudent risk management until renewed price hikes:
We have a Hash Ribbon surrender. AKA a slowdown in Bitcoin hash rate growth after what was an incredible (unsustainable) 50% surge in 2023. The surrender of Hash Ribbons is not a sell signal, but it’s also not bullish. Ensure risk management until growth resumes.
Market analyst Lucas Widra confirmed Edwards’ position, pointing That the death of bitcoin hash tapes is a signal of a time of uncertainty. Wydra revealed that historically, there have been 14 similar events, each of which led to a variety of outcomes. Of these events, three resulted in rallies, six resulted in lateral moves, and five resulted in dips.
Wydra takes a statistical approach and reassures investors that, statistically speaking, the surrender of Hash Ribbons doesn’t do much harm to the market. In fact, he maintains, when the capitulation finally subsides, it will lead to a strong buy signal, one that has shown remarkable effectiveness in the past.
The last time the Hash Ribbons surrender signal appeared was at the end of November 2022. It was followed by a prolonged sideways trend for more than a month until the buy signal flashed at the beginning of January. Results? Bitcoin embarked on a furious rally, making for an unforgettable start to the year.
Why Bitcoin Hash Strips is such a powerful tool
In simple terms, the Hash Ribbon Indicator is designed to detect periods when BTC miners are experiencing distress and potential capitulation. These phases tend to coincide with major drops in the Bitcoin price, making them attractive buying opportunities for savvy investors.
Miners play an important role in securing the Bitcoin network and processing transactions. During periods of rapid price increases followed by sharp declines, some miners may find it financially difficult to continue their operations, which leads them to shut down their mining rigs.
Charles Edwards explains that when miners capitulate, it may be the strongest buy signal observable in the bitcoin market. However, the indicator does not claim timing the exact price low. Instead, it identifies periods when miners shut down their rigs due to adverse market conditions, which leads to lower hashrates.
These moments often correspond to macro bottoms in the Bitcoin price, making them opportune moments for Bitcoin accumulation.
At press time, BTC is trading near the lows of the range at $29,863.
Featured image from iStock, chart from TradingView.com