After rising more than 28% in the past 16 days, Bitcoin price was rejected at key resistance at $68,500 on Sunday. Since then, the BTC price has seen a slight pullback, but according to Charles Edwards, the founder of Capriole Investments, investors can expect the bullish momentum to continue. Edwards shared the chart below and stated via X: “BREAKING: Hash Ribbon Buy Signal Just Fired.”
Why Bitcoin Hash Ribbons Matter
This statement is significant, as hash ribbons have historically been a reliable indicator, with an accuracy of 84% in predicting Bitcoin’s major price bottoms. The hash ribbons are based on the trade-off between Bitcoin’s hash rate – the total computing power used to mine and process transactions – and Bitcoin’s market price.
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Analysts note that a drop in the price of Bitcoin or an increase in operational costs, such as electricity, could cause miners to temporarily suspend operations. This period, known as ‘miner capitulation’, is crucial as a resumption of mining activity is typically seen as a bullish signal for Bitcoin’s price.
The indicator itself is derived from the moving averages of the Bitcoin hash rate; specifically the 30-day and 60-day moving averages. A ‘buy’ signal occurs when the shorter-term moving average rises above the longer-term average following a period of miner capitulation. This indicates that the worst of the sell-off may be over and a recovery phase is likely underway.
Crypto analyst Jelle, known on X as @CryptoJelleNL, commented, “Hash ribbons show that the small capitulation is over! This signal is printed after every halving event and after major corrections – suggesting that the next phase of expansion is just around the corner. Time for 80k+?”
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The bullish sentiment is further supported by the @DaFinancialPage account noted on X: “Capitulation of miners. The blue buy signal from the Hash Ribbons indicator has appeared 19 times. Of those, 16 marked Bitcoin’s macro low, giving it a win rate of 84%. The 3 times this did not happen, a major correction followed.”
Thus, the appearance of the hash ribbon ‘Buy’ signal can be interpreted as a strong indicator of the next bullish phase in Bitcoin’s market cycle. However, the three cases where the signal failed to predict a significant increase highlight the inherent risks and uncertainties with each indicator.
It is striking that the technical analysis closely matches the expected target of $80,000, discussed by Jelle. The 1,272 Fibonacci extension is approximately $79,337. However, before a new all-time high can ever be explored, Bitcoin must secure support at the 0.618 Fibonacci retracement level at $65,943 on the daily chart, which could act as a critical juncture. Subsequent levels at the 0.786 Fibonacci at $69,384 and the 1.0 Fibonacci at $73,767 serve as potential interim targets.
At the time of writing, BTC was trading at $66,403.
Featured image created with DALL·E, chart from TradingView.com