Bitcoin’s Long-Term Buy Signal Is Flashing Again

Bitcoin’s Long-Term Buy Signal Is Flashing Again
Jonathan Hobbs, CFA

over 1 year ago1 min

With so many people feeling bearish about crypto right now, you might not have seen this coming: a long-term bitcoin buy signal flashed over the weekend. It’s called the bitcoin hash ribbons indicator, and it’s lit up just 13 times since 2012. But in almost every instance, it’s proved to be a good time to buy.

The indicator plays out in three stages, which are depicted in the chart by various colored dots. In the first stage (gray dot), bitcoin miners throw in the towel or “capitulate”, switching off their machines as it becomes less profitable for them to mine at lower bitcoin prices. At that point, the bitcoin hash rate – the total computing power of machines mining bitcoin – drops off too, and the 30-day moving average (MA) of the hash rate (green line) crosses below the 60-day MA (gray line). Then in the second stage (bright green dot), the hash rate recovers as miners power back up, with the 30-day MA of the hash rate crossing back above the 60-day MA. Finally in the third stage (blue dot), a buy signal flashes once the 10-day MA of bitcoin’s price is above its 20-day MA. It’s a final sign that both mining power and price momentum are on the mend.

Bitcoin’s price (blue line, top of chart) has typically seen a longer-term rebound after the signal. And if history repeats, that could happen this time around as well. But a word of caution: it’s common for bitcoin’s price to slide a bit after the signal, before eventually turning higher. So don’t be surprised to see one last shakeout first.

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