A Bitcoin (BTC) mining indicator that preceded several major BTC price rallies is flashing again.
Blockchain analytics platform Glassnode discovered a golden cross between the 30-day and 60-day moving averages of Bitcoin’s hash bands. In theory, such a crossover suggests that price momentum is changing from negative to positive.
Bitcoin hash bands. Source: Glassnode
Hash bands are based on Bitcoin’s network hash rate behavior and are intended to tell investors when the price will rise. Simply put, they show when mining bitcoin becomes more expensive compared to the base cost of mining.
Miners earn less on Bitcoin price corrections in US dollars. To pay for their operating costs, they sell their newly minted bitcoins to raise capital. They also tend to shut down machines to reduce their operating costs, which leads to a drop in the hash rate on the Bitcoin network.
But the hash rates recover later thanks to Bitcoin’s automatic difficulty adjustment. This lowers mining costs and makes it cheaper for less efficient miners to join the fight. The miners also collect coins and thus end the surrender time.
Hence, hash bands demonstrate the miners’ sentimental shift from surrender to accumulation. This provides traders with a method to determine potential price lows in the spot market.
Hash ribbon fractals predict Bitcoin bull runs
Recent history has shown that the price of Bitcoin has followed the hash ribbon signals.
For example, the graph below illustrates several instances where a crossover between the 30-day (green) and 60-day (blue) hash band moving averages has caused Bitcoin bulls to track upward moves.
For example, the so-called supply bottleneck event in December 2020 coincided with the green-blue transition of the moving average. The closing bid for Bitcoin that month was $ 28,990, which rose to $ 62,971 on April 14th.
Bitcoin Hash Ribbon Crossovers in Recent History. Source: Glassnode
Similarly, the 2019 bear capitulation, the mini bear cycle in January 2020, the coronavirus-induced crash in March 2020, and the halving event in May all happened along with the green-blue moving average crossover. Each was followed by an upward movement in the Bitcoin market.
The recent bullish crossover appeared as part of what Glassnode called the “Great Migration Recovery”. In detail, China’s crackdown on the crypto sector in May forced regional miners to shut down. Some decided to shut down completely under the supervision of Beijing, while others moved their mining operations overseas.
Related: Bitcoin mining difficulty rises a second time as miners settle offshore
During the time of the Chinese mining community’s exodus, Bitcoin’s hash rate dropped from 180.66 million terra hashes per second (TH / s) on May 11 to 84.79 million TH / s by July – a decrease of more than 53%.
But by August 17, the hash rate had rebounded to 119.12 million TH / s when the miners relocated their operations to Canada, Kazakhstan, Russia, and the United States.
“Historically, when the worst mining effects are over and the recovery is in progress, the 30D hash ribbon crosses 60D,” noted Glassnode.
Bitcoin was trading near $ 45,200 at the time of writing, up 55% from its July 20 low of $ 29,301.
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