The Bitcoin Mining Difficulty has increased by 21.5%. This is the largest positive Difficulty adjustment in almost 7 years. Find out what this tells us about the possible Bitcoin price trend in the coming weeks.
A high Difficulty means that additional computing power is needed to verify transactions entered on the Bitcoin blockchain. The higher the Difficulty required to create a block, the better the network’s security, as attackers would need enormous resources to take control.
However, an increased Difficulty can also mean that their operation is no longer profitable for many BTC miners, and they have to shut down their mining rigs. If this applies to many miners, it is also called miner capitulation.
Miner capitulation thus occurs in the bitcoin market when mining is largely no longer profitable. When profitability drops, miners naturally sell their BTC holdings and capitulate in response to deteriorating market sentiment. In theory, when miners start selling their holdings, this can lead to significant selling pressure from miners.
How we can take advantage of this knowledge to get in on the Bitcoin price in time for its next rise is what we’re going to look at now.
The Hash Ribbons indicator is an excellent tool to turn this data into useful information about the Bitcoin price when it comes to the Difficulty and, therefore, the Hash Rate on the Bitcoin network. It is not for nothing that it is one of the few indicators that we have explicitly drawn attention to in our Bitcoin rate guide.
The Hash Ribbons indicator uses the 30 with the 60 SMA of the hash rate of Bitcoin and warns of a miner capitulation when the 30 crosses the 60 SMA of the hash rate from above nor below and produces a buy signal when the 30 breaks the 60 SMA from below to above.
Whenever the green line of the indicator falls below the signal line, a so-called miner capitulation occurs. This means that for most miners in the network, BTC mining has not been profitable for a long time due to the low Bitcoin price and the relatively high Difficulty. As a result, they are throttling their operations. At least until the Difficulty has adjusted again and Bitcoin mining is made more profitable again. Crossing the signal line from the bottom to the top signals the change of trend on the market, and the indicator produces a buy signal.
Fig.2: Bitcoin price and the hash ribbon indicator. Source: Tradingview
Fig.2 shows that miner capitulation has occurred again. It also shows that the indicator and its buy signals can reliably forecast an upward movement in the Bitcoin price. Therefore, it is advisable to include the indicator in your analysis to predict a possible timely end of the current correction.
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