Two indicators seem to indicate that bitcoin is ready for an upward move. Of course, this is not a guarantee and certainly not investment advice, so judge for yourself. In this article we will first outline the current situation before those two indicators take their turn.
Bitcoin worth a third since peak
The bitcoin rate reached its highest ever value in November 2021. For a very short time, BTC was traded for nearly 60,000 euros. By now, only about one-third of that is left. At the beginning of this weekend, the price fell again by 8% but today BTC seems to be in calmer waters.
The key question, of course, is whether this is the time to buy bitcoin and whether the bottom has been reached. For this we look at a simple and a slightly more complex indicator.
Long term of bitcoin is simple
Why do it the hard way when it can be done the easy way? Below the total history of bitcoin On crypto exchange Bitstamp. This is one of the oldest exchanges offering trading in bitcoin. In the chart, each candle represents one month and the inspiration comes from Gödel.
Since 2012, bitcoin has been moving in an inverted Nike logo. For now, there have been two moments in bitcoin’s history that are reminiscent of the current situation. Both moments came right after a major bull run.
The first is in 2015, after bitcoin was worth a thousand dollars for the first time just before. The second time played out after the bull run of 2017 ending. Currently, the price is heading for the lower blue line and if this model can hold, bitcoin will move up quickly from there.
With a chart like this comes a long-term strategy, one that is not affected by the day-to-day worries of the bitcoin price. One of the best strategies is DCA, or dollar cost averaging. Even though dollars are discussed, this strategy naturally lends itself to euros as well.
Buying Bitcoin via DCA strategy
In short, DCA is a strategy where you invest a fixed amount in small increments periodically rather than all at once. Suppose you want to invest 1200 Euros, with DCA you can choose to put in 100 Euros every month for a year.
By the way, don’t fixate on that period of a year, because that’s actually also short term. Nobody can say for sure how long the bear market will last.
Hash Ribbon says buy bitcoin
Another indicator is to look at the selling behavior of miners. For this we use the indicator hash ribbons and let it just recommend ‘buy’.
Miners need money to be able to mine, for energy, location, staff, etc. If the price drops too much, it will impact miners’ income and they will have to sell more bitcoin from their reserves to stay liquid. This creates additional selling pressure on the market
To determine if miners are struggling and need to sell bitcoin, Charles Edwards developed the hash ribbon. Edwards writes that when miners give up, this is the best time to buy bitcoin.
Bitcoin mining capitulation over after 71 days
The bitcoin hash ribbon indicator attempts to recognize periods when miners are in distress and may capitulate. The assumption is that such periods may occur when the bitcoin price has reached a low point. According to Edwards, the current capitulation period is after 71 days finally ended.
In the chart above, on the left is the hash rate (computational power of all miners) shown. On the right is the bitcoin rate in dollars.
The blue line is the moved average of the hash rate in the last 30 days, the purple line shows the same but from the last 60 days.
But what’s really interesting are the orange and green vertical bars.
- Orange: 30 DMA drops below 60 DMA, hash rate drops and miners capitulate
- Green: 30 DMA goes back above 60 DMA, this marks the end of the capitulation of miners
According to Edwards, the creator of this whole metric, orange will now finally switch to green.
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