Certain technical signals and indicators are suggesting that Bitcoin has already bottomed and is in recovery mode. There is unlikely to be much further miner capitulation as selling pressure wanes.
Bitcoin has spent another weekend consolidating at the upper $6k zone as longer-term technical signals continue to strengthen. Providing there is no further lower-low in terms of price, things could start to look bullish again for BTC and its brethren.
Weak Bitcoin Miners Shaken Out
Industry analyst Willy Woo has been looking into Bitcoin hash ribbons as a metric to determine when markets are in recovery. Hash ribbons combine the hash rate and difficulty of BTC to identify when miners are capitulating. This information provides signals that highlight potential optimal times to buy in a bear market or after a hard market crash.
Bitcoin difficulty is adjusted every 2016 blocks — roughly every 2 weeks. Hash rate, however, is calculated daily based on the actual number of blocks found by miners each day. Therefore difficulty effectively follows behind the hash rate by up to two weeks, effectively making it a lagging indicator for miner capitulation.
Woo observed that there was probably some capitulation by miners during the crash a few weeks ago when Bitcoin dumped more than 50% from over $9,000 to below $4,000 briefly. He followed this up concluding that he does not expect miners to add anymore selling pressure from here on.
A tale of 2 miner charts. #Bullish
Hash Ribbons recovering (assumes no lower low), a reliable bottom signal, probably some miner capitulation during the crash. They last got culled in Dec 2018, only the strong remain, I don't expect miners to add more sell pressure from here. pic.twitter.com/t0GEqKCKjv
— Willy Woo (@woonomic) April 5, 2020
The chart shows the congestion of these hash ribbons during the market low at the end of 2019. A similar pattern occurred after the crash last month but the signals have already started to reverse and climb again as the halving approaches in less than forty days’ time.
Woo followed up this Tweet with another commenting that the ratio between Bitcoin’s market capitalization to its energy consumption is in the buy zone.
Hash Rate Recovery
Hash rate has already recovered around 34% since it bottomed at 85 EH/s in late March. The latest reading taken on April 5 had a hash rate of 114.48 EH/s — not far off the all-time high recorded a month ago on March 5.
As previously reported by Beincrypto, other metrics such as Puell Multiples, MVRV ratios, and percent of UTXOs in profit also indicate that Bitcoin has already bottomed.