The latest trend in Bitcoin’s “hash tape” indicator has just formed a pattern that has historically been a buy signal for the cryptocurrency.
Bitcoin hash tape buy signal deactivates when miner capitulation comes to an end
As one analyst explained on Twitter, the capitulation phase of BTC miners appears to have ended today after 71 days.
Before trying to understand what the “hash tape” indicator does, it’s best to first take a look at the “hash rate” metric.
Hashrate is a measure of the total amount of computing power connected to the Bitcoin blockchain by miners. During bear markets, the income of some miners drops so much that running their trades becomes unprofitable for them. At such times, your only option is to take your machines offline, which records a downward trend in hashrate.
In previous bear markets, troughs often occurred during these periods of miner capitulations, where large numbers of miners quickly go offline due to low income.
One indicator to identify these periods of miner capitulation is hash tapes. Conceived by the aforementioned analyst Charles Edwards, this metric uses two different moving averages of the hashrate, the 30-day MA and the 60-day MA, to observe changes in miner behavior.
Here is a chart that shows the trend of Bitcoin hash tapes in recent years:
The 30-day SMA hashrate appears to have surpassed the 60-day SMA version | Source: Charles Edwards on Twitter
As you can see in the chart above, the capitulation periods of Bitcoin miners are marked with the hash ribbon indicator.
Whenever the 30-day MA version of the hashrate drops below the 60-day MA line, miners are assumed to be starting a capitulation phase.
A break above the 60-day MA by the 30-day MA, on the other hand, implies an end to the capitulation of these chain validators.
When this type of capitulation occurs that ends in the crossing of hash tapes, a buy signal is triggered for the cryptocurrency.
But even among these buy signals, there are some that are especially profitable. These signals are formed after miner capitulations that occur more than 2 years after any halving event.
Today, hash tapes once again painted the historic pattern of the buy signal as the miner’s latest capitulation series came to an end after 71 days. It has also been over 2 years since the last halving, which following the previous trend would suggest that this is one of those rare “most profitable” buy signals for Bitcoin.
At the time of writing, Bitcoin price hovers around $21,300, down 13% from last week.