The Hash Ribbons indicator is an On-Chain indicator that shows us the health status of the Bitcoin network, and historically has been characterized by accurately signaling large increases, and in some cases has also served to signal bottoms in the price, let's see in this post what this indicator consists of, and what it is signaling us now.
Image edited in powerpoint, original from pexels.com.
What is the Hash Ribbons indicator?
This indicator is based on a very important parameter of the Bitcoin network, the Hashrate, which in a simple way we could define it as the computational power that miners are generating at a given time.
This indicator uses the relationship between two simple moving averages of the Hashrate to produce reliable buy signals in the market, it is based on a 30-day simple moving average (SMA30) and a 60-day moving average (SMA60), and it is considered that, when a bullish crossover occurs between these two moving averages, a buy signal is produced.
Screenshot taken from Tradingview.com.
Basically there are three movements to look out for, which on the weekly price chart generated by Tradingview shown above are shown as follows:
Capitulation: capitulation of the miners is considered to occur when the SMA30 falls below the SMA60, and on the price chart this is reflected by turning red on the chart.
Capitulation comes to an end: this situation occurs when the SMA30 crosses back above the SMA60, on the chart we will notice that a green dot lights up and the chart turns green again.
Bullish momentum: additionally the indicator uses a ratio between a 10-day SMA of the price and a 20-day SMA; and when the 10-day SMA crosses above the 20-day SMA it is considered that the momentum of the BTC price has recovered, and a blue dot lights up giving the "Buy" signal.
The interpretation given to the blue dot is that a bottom has been reached before the signal occurs, and that the BTC price will not return below the low that preceded the signal, signaling a historical bottom.
Now, historically the Hash Ribbons has been very accurate, since in the vast majority of cases, bullish crossovers have led to a subsequent short-term bullish move, as we can see in the following image, if we look at the records since 2015 (excluding the current case) in each average crossover has been so (green circles), there have only been two exceptions in which the price fell below the previous low of the signal, being these cases in December 2019 and in August 2021 (red circles).
Screenshot taken from Hodlers.es.
Although in these cases the signal failed in the long term, in the short term after the crossover appeared there was an upward movement.
What is the indicator currently saying?
Recently we can see that there was a bullish crossover on August 19 and the blue signal was turned on.
Screenshot taken from Tradingview.com.
However, since then the price only declined although it did not reach its current low of $17600, and we see a recent recovery. So, if the BTC price defends this level and the does not continue to fall, the Hash Ribbons indicator has a high chance of behaving as in most cases, but if the upside move is not sustained, it would be another one of the few times that such a crossover is not followed by a significant price increase.
Well friends, just watch how the price behaves in the next few days to determine which of the options will follow. Hope you liked the information, see you next time!