Bitcoin Hash Ribbons Suggest Miner Capitulation Is On
As explained by CryptoQuant community manager Maartunn in a Quicktake , miners are capitulating right now if the Hash Ribbons indicator is to be believed. This on-chain metric is generally used to determine whether miners are in distress.
BTC runs on a proof-of-work (PoW) consensus mechanism where miners play the role of validators and compete against each other using computing power to get a chance to add the next block to the chain.This computing power, when measured across the network, can provide insight into the health of the miners as a whole. Due to this reason, the Hash Ribbons indicator makes use of this total Bitcoin “Hashrate” to judge the situation of the miners.
Naturally, a rise in the Hashrate suggests the network is attracting miners right now, while a decline could imply low profitability is making some of these validators pull out from BTC. The Hash Ribbons indicator uses two moving averages (MA) of the Hashrate, 30-day and 60-day, to represent whether these behaviors are particularly intense or not at the moment. When the 30-day ribbon moves under the 60-day one, it suggests that miners are mass capitulating. On the other hand, the opposite cross suggests network is observing growth again. Now, what relevance do these trends have for Bitcoin? According to , the creator of the Hash Ribbons, the miners have historically been quite resilient, and they only quit when things get especially bad for the cryptocurrency. As such, the market may be more likely to approach a bottom whenever these chain validators show capitulation. Below is a chart that shows how the miners’ behaviour has looked recently according to this indicator:Recently, the BTC price has been stuck in consolidation while the block rewards have been slashed in half in the latest Halving event. This has led to tightening revenues for these chain validators, so it’s not surprising to see that the miners with the least efficient machines have already started ditching the network in hordes.
In the chart, past instances of miner capitulation are shown with the green lines. It’s visible that while miner capitulation has generally indeed occurred near profitable buying points into the asset, these bottoms haven’t immediately appeared after the crossovers have occurred. As the analyst notes, “It unfolds in the subsequent days and weeks after less efficient miners throw in the towel.”