The hash ribbons indicator flashed a buy signal for the flagship digital cryptocurrency. Whenever this happens, an "explosive rally" follows, analysts claim. Is this true? What does the indicator mean? And how relevant is the current situation to previous rallies?
The hash ribbons indicator is based on hash rate data and tracks the global price bottom of BTC. The metrics are configured in such a way that they assess market sentiment and look for opportunities to reduce miner activity. At issue is the so-called “miner capitulation,” when costs exceed the price of producing cryptocurrency for several months. This process yields data that provides insight into the proportion of the mining rig that can be disconnected from the network.
Since the hash ribbons indicator is based on average indicators, it can perform well in long-term forecasting and seeking entry points into a BTC position.
The market is aware of cases when in 2015, 2019 and 2021 hash ribbons showed a “bad” entry point into a position when the price of the flagship cryptocurrency did not rise but fell. During this time, it was refined by adding simple moving averages to the chart for different periods for BTC.
Since the indicator itself relies solely on hash rate statistics, investors should tread cautiously when making trading decisions based solely on this metric.