A Rare Bullish Bitcoin Signal Has Finally Appeared

Keshav Verma

1 year ago

3 mins read

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A rare bullish bitcoin signal, the difficulty ribbon compression, has started pumping up for the first time since the bull run started.

The Bitcoin Difficulty Ribbon Compression Goes Up

As pointed out by a BTC analyst on Twitter, the difficulty ribbon compression seems to be going up for the first time since the bull run started.

The indicator is a measure of the moving averages of bitcoin mining difficulty. The mining difficulty metric can be calculated by estimating the number of hashes for mining a block.

To properly quantify these values, the BTC difficulty ribbon compression uses a normalized standard deviation. Higher values have historically been associated with the price moving up, while lower values suggest a downward trend.

Now, here is how the chart looks like for the BTC difficulty ribbon compression in the past decade:

BTC difficulty ribbon compression seems to be sharply rising | Source: glassnode

The above graph reveals some interesting features about the indicator. It does seem like that the difficulty ribbon compression has a historic relationship with the price.

It looks like when the value of the indicator drops very low, BTC hits a low on the curve. And when it rises, like it is doing right now, the price also moves up.

However, there is something to consider here. The indicator is a measure of the mining difficulty, and right now the world hash rate is facing some special circumstances due to the China crackdowns.

After massively dropping for a while, the global Bitcoin hash rate has started to go up again as miners migrate from China to other countries like the US. This should mean the difficult would go up quickly as the usual mining farms start their operations again.

Such a ramp up in difficulty might look like what the chart is showing right now.

BTC Price

Bitcoin price is around $32k at the time of writing, down 4% in the last 7 days. Over the last month, the coin has dropped almost 17% in value.

Here is a chart showing the trend in the crypto’s value over the past 6 months:

Bitcoin seems to be on a downtrend | Source: BTCUSD on TradingView

BTC’s price continues to be range bound as the crypto remains stuck in the $30k to $35k range. It’s unclear when the coin might escape these levels, and which direction it might go in next.

If the difficulty ribbon compression is anything to go by, Bitcoin’s price might be seeing an increase soon. On the other hand, due to the special mining conditions, this rise in the value of the indicator might not directly translate to the price this time.

Keshav Verma

Keshav is currently a senior writer at NewsBTC and has been attached to the website since June 14, 2021.

Keshav has been writing for many years, first as a hobbyist and later as a freelancer. He has experience working in a variety of niches, even fiction at one point, but the cryptocurrency industry has been the longest he has been attached to.

In terms of official educational qualifications, Keshav holds a bachelor’s degree in Physics from one of the premier institutes of India, the University of Delhi (DU). He started the degree with an aim of eventually making a career in Physics, but the onset of COVID led to a shift in plans. The virus meant that the college classes had to be delivered in the online-mode and with it came free time for him to explore other passions.

Initially only seeking to make some beer money, Keshav unexpectedly landed clients offering real projects, after which there was no looking back. Writing was something he had always enjoyed and to be able to do it for a living was like a dream come true.

Keshav completed his Physics degree in 2022 and has been focusing on his writing career since, but that doesn’t mean his passion for Physics has ended. He eventually plans to re-enter university to obtain a masters degree in the same field, but perhaps only to satiate his own interest rather than for using it as a means to find employment..

Keshav has found blockchain and its concepts fascinating ever since he started going down the rabbit-hole back in 2020. On-chain analysis in particular has been something he likes to research more about, which is why his NewsBTC pieces tend to involve it in some form.

Being of the science background, Keshav likes if concepts are clear and consistent, so he generally explains the indicators he talks about in a bit of detail so that the readers can perhaps come out having understood and learnt something new.

As for hobbies, Keshav is super into football, anime, and videogames. He enjoys football not only as a watcher, but also as a player. For games, Keshav generally tends towards enjoying singleplayer adventures, with EA FC (formerly FIFA) being the only online game he is active in. Though, perhaps due to being ultra-focused on the game, he is today a semi-pro on the EA FC scene, regularly participating in tournaments and sometimes even taking back prize money.

Because of his enthusiasm for anime and games, he also self-learned Japanese along the way to consume some of the untranslated gems out there. The skill didn’t merely remain as just a hobby, either, as he put it to productive use during his exploration for small-time gigs at the start of COVID, fulfilling a couple of Japanese-to-English translation jobs.

Keshav is also big into fitness, with agility and acceleration-related workouts making a big part of his program due to the relevance they have in football. On top of that, he also has a more traditional strength based program for the gym, which he does to maintain an overall fitness level of his body.

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