While weekend storms in the US disrupted Bitcoin, BTC$87,708.96 Cryptocurrency traders will turn to a metric known as the hash ribbon as rising costs of mining hit profitability and prompted companies to reduce computing power, or hashrate. This indicator is an indicator built on the premise that the prices of the largest cryptocurrencies often reach lows during periods called miner capitulations.
In the past, there have been periods where miners were forced to slow down or shut down their machines, followed by periods where Bitcoin strengthened when conditions stabilized. This is reflected in the hash ribbon, an indicator that tracks the 30-day and 60-day moving average of hashrate on Glassnode.
When the short-term average falls below the long-term average, capitulation is signaled (shown in light red). The worst stage is considered over when the 30-day reading is greater than 60 days and is represented by dark red. Historically, when this recovery coincides with a change in price momentum from negative to positive, marked by a transition from dark red to white, it coincides with a long-term buying opportunity.
Hashrate, a measure of the total computational power securing the Bitcoin blockchain, has dropped by about 20% from about 1.2 zetahashes/second (ZH/s) to about 950 exahashes/second (EH/s). That means the next difficulty adjustment, used to maintain consistent 10-minute block times, is expected to be approximately 17% lower, which would be the largest difficulty drop since July 2021, when China banned Bitcoin mining.
The last time the hash ribbon capitulated was in late November, when Bitcoin hit a low of around $80,000. It’s currently around $88,000.
A similar pattern emerged in mid-2024. Following the capitulation of the hash ribbon and the unwinding of yen carry trades, Bitcoin bottomed out around $49,000 in August and rose to $100,000 the following January.
With the collapse of the cryptocurrency exchange FTX in 2022, Bitcoin bottomed out at nearly $15,000 amid the capitulation of miners. Once the hash ribbon normalized, the price recovered to around $22,000.
The key question now is whether the pattern repeats and Bitcoin enters a new expansion phase as the hashrate and hash ribbon begin to normalize.