On-chain data indicates that the widely recognized Bitcoin Hash Ribbons indicator has issued a warning signal regarding miner capitulation. Here’s what this could entail.
Bitcoin Hash Ribbons Indicating Miner Distress
According to a post by CryptoQuant author Darkfrost on X platform, the Bitcoin Hash Ribbons have experienced a crossover that historically reflects increased stress among miners. This indicator assesses the miner situation by contrasting the 30-day and 60-day moving averages (MAs) of the BTC Hashrate, a measure of the combined computing power linked to the blockchain.
The Hashrate trend serves as an indicator of the miners’ sentiment: they typically expand computing power (increasing the Hashrate) when mining is profitable and/or they anticipate a bullish trend for BTC. Conversely, they reduce mining capabilities (decreasing the Hashrate) when they struggle to break even.
The Hash Ribbons indicator effectively captures transitions between these two states. When the 30-day ribbon drops below the 60-day one, it signals that miners are rapidly scaling back their operations, which may signify capitulation.
Recently, this crossover has reemerged for Bitcoin, as illustrated in the chart shared by Darkfrost below.
Consequently, it appears that miners are currently entering another capitulation stage. “Historically, these mining stress periods have proven beneficial for Bitcoin investors, apart from the 2021 mining ban in China,” noted the analyst.
However, this signal does not serve as a definitive buy indicator, as mining capitulation often does not precisely align with market bottoms. “In the short term, such episodes tend to be bearish, as miners might need to increase selling to cover operational costs,” Darkfrost elaborated.
In general, periods of miner capitulation have often led to profitable buying opportunities for the cryptocurrency, although it’s uncertain how long these phases will last. The chart indicates that while some Hash Ribbons signals have been relatively short-lived, others have persisted for weeks.
The recent decline in Hashrate among miners can likely be attributed to Bitcoin’s bearish trajectory. Miners are rewarded in BTC, so fluctuations in the coin’s USD value directly impact their dollar revenue.
Previously, miners were in a phase of rapid expansion during the bullish rally, resulting in a significant increase in the network’s mining Difficulty. With prices falling and Difficulty remaining high, miners have encountered a double challenge over the past month.
BTC Price
Bitcoin briefly recovered above $92,000 on Monday, but it seems that the asset could not sustain this level, as its current price has returned to $90,300.
