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Emergence of a Rare Signal Pointing to the Bitcoin Price Bottom

Predicting the bottom of a bear market is like trying to catch a falling knife. Nevertheless, based on how the market moved in relation to important indications during prior bear runs, traders often try to forecast one. It is assumed that the past will repeat itself in this situation.
One of these unusual signals has appeared, indicating that it is currently the greatest moment to increase exposure to bitcoin as its slide may be flattening.
For the first time in more than a year, the Bitcoin mining difficulty ribbon, which consists of short- and long-duration simple moving averages on the mining difficulty, has contracted, signaling miner surrender. According to data given by analytics company Glassnode, the ribbon compression marked the conclusion of prior bear markets, including the one that occurred in 2014.

When currency mints stop producing coins, the hashrate and mining difficulty decrease, which is known as “miner capitulation.” As a result, there is less selling pressure, which promotes price stability and eventually a bullish rebound. To pay for operating expenses, miners often sell the coins they have produced, adding to market negative pressure.

The ribbon shows mining difficulty 9-, 14-, 25-, 40-, 60-, 90-, 128-, and 200-day simple moving averages, a gauge of how hard it is to mine a block and verify transactions in the blockchain of bitcoin.
Recently, a number of miners gave up to remain solvent. Mining challenges are changed every two weeks. The size of the mining network and the combined mining power of its users influence whether the difficulty is raised or lowered.
Although the most recent difficulties ribbon compression gives battered bulls hope, the positive signal should be interpreted in light of macro variables that indicate a limited likelihood of a sudden bullish turnaround.
Officials from the Federal Reserve (Fed) said on Wednesday that more liquidity tightening is required to contain inflation, contradicting market expectations that the central bank will scale down rate increases in the near future and turn to easing in 2019. This year, the Fed’s tightening of liquidity has agitated the asset markets.

Additionally, the difficulty ribbon is completely reliant on miner flows, which make up a minor fraction of the market now and may not be as trustworthy an indication as they were before to 2020. Due to growing institutional interest over the last two years, bitcoin has developed into a macro asset.

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