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Capitulation and Bitcoin market bottom

Prelude to Bull Run: Bitcoin Hash Ribbons Signal Miner Capitulation Only Just Started

Tony Spilotro by Tony Spilotro
3 years ago
in Bitcoin, Cryptocurrency news
Reading Time: 3 mins read
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Hash rate is plummeting faster than Bitcoin’s price, suggesting that miners are starting to turn off their machines and await higher prices to return.

An indicator called Hash Ribbons is signaling that miners are only just beginning to capitulate. And while this could suggest more downside in the near term, once things return to normal, the lows act as the final shakeout before a new bull run begins.

Hash Ribbons Signal Miner Capitulation Has Only Just Begun

Bitcoin derives much of its value from its decentralized blockchain network, which is kept operating by a process called proof-of-work, where miners make complex computations that validate each block, keeping the network running and secure.

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These miners act as the backbone to the overall supply and demand of the Bitcoin market. They drive the bulk of the supply flooding the market, as all Bitcoin ever sold originated from this process.

Related Reading | Miner Capitulation: Hash Rate is Dropping Faster Than Bitcoin Price 

Miners aim to produce each Bitcoin resulting in each BTC generated being worth more in value than the cost required in energy to produce each BTC.

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When operational costs run lower than the price of Bitcoin, miners are literally better off buying the cryptocurrency outright than continuing to operate at a loss.

That’s exactly what’s been happening after the latest cryptocurrency market collapse following peak coronavirus panic selling, according to a tool called Hash Ribbons.

Hash Ribbons are used to better understand the price of Bitcoin and its impact on miners.

The tool can help traders prepare for potential mass capitulation by miners, who would be selling their BTC stores, either cashing out their operations completely, or attempting to prepare for lower prices in the future by moving into cash now.

Even though Bitcoin has already crashed by a substantial margin in recent weeks, it’s only now that the Hash Ribbons are signaling that capitulation is starting across the mining industry.

bitcoin hash ribbons

Is This The Final Shakeout Before the Next Bitcoin Bull Run?

Miners with the highest production costs will be the first to turn off their rigs, which in turn caused mining difficulty to drop leveling out operating costs for those miners that remain.

This could lead to serious centralization in Bitcoin, however.

But Hash Ribbons signaling capitulation in miners historically wasn’t always a bad thing.

bitcoin hash ribbons

The last two instances of the occurrence resulted in large rallies, and during the last two Bitcoin bear to bull cycles, miners capitulated three times total before each new bull run began, with the third and final time each cycle being in close proximity to the halving.

Related Reading | Bitcoin Trades Below Production Cost, Miners Are Better Off Buying 

After that, the process doesn’t restart until a new all-time high is set, and a yet another bear cycle begins. Could this be what’s next for Bitcoin?

Tags: bitcoincryptohash ribbonsmining
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Tony Spilotro

Tony Spilotro

I'm Tony Spilotro. Behind the pseudonym, I'm a global remote work leader with a decade of award-winning content experience and excellence. Here, I explore my newfound passions pertaining to privacy, finance, economics, politics, cryptography, property rights, and other libertarian-esque views. I am a Bitcoin evangelist, maximalist, and educator whenever I can be, helping to spread its message of freedom from government control, monetary policy mismanagement, and passing the buck - literally – to future generations. My journey from a curious retail crypto investor to a serious Bitcoin advocate, trader, and technical analyst is an unusual one, but life-changing nonetheless and has become less about money and more about a long-overdue revolution. While a firm believer in the laws governing math and science, I am profoundly fascinated by the impact of astrology and astronomy including moon and solar cycles and planetary alignment and their ability to influence and potentially predict markets. It hasn't yet clicked for me as to how to put anything to use, but I consider it my current rabbit hole I can't yet dig out of. My perspective of growing up alongside the internet, the dot com era, the Great Recession, and roots in video games collecting coins and rare items caused Bitcoin to immediately make sense to me. Through all of these lenses, I seek to produce content that is educational and entertaining, and I thank you sincerely for taking the time to read what I have to say. Please follow me on Twitter at @tonyspilotroBTC and feel free to drop me a line if you would like to work together.

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