Bitcoin has been experiencing an intense drawdown the past week. Inflows into exchanges have been increasing, particularly from short-term investors. This isn’t to surprising as Elon was a big catalyst for short-term traders to enter and his recent negativity towards Bitcoin may have influenced their decisions.
It’s important to note that the issues Elon raised are extremely old news for long-term holders. Bigger block sizes dates back to 2017 during the Block wars with Bitcoin Cash. The energy debate has been ongoing and involves a lot more details that are often overlooked. Many view Bitcoin as a leader in growing the renewable energy industry. I will write more on this in a later newsletter.
Also, big drawdowns are very normal in bull markets. With big upside comes big corrections. So far we have seen:
31% pullback in January
26% pullback in February
18% pullback in March
35% pullback in April and May (not over yet)
Each time short-term traders and other commentators have been calling for the end of the bull market. This could be true, however on-chain data and prior bull market history does not support this viewpoint. This is likely why long-term buyers have been stepping in to buy this correction.
For todays metric we will be discussing the Bitcoin Hash Ribbon. This metric is specifically good at identifying great buying opportunities after large drawdowns in the Bitcoin price. It tracks miner capitulation as mining becomes unprofitable overall.
Hash Ribbon uses a 30 day and 60 day moving average for the Bitcoin hash rate. When the 30 day crosses above the 60 day after a big price drawdown, it signals the end of miner capitulation and starts the miner recovery. On the chart, this occurs when light red switches to dark red.
Once price momentum switches from negative to positive, it has signalled a great buying opportunity. On the chart, this occurs when dark red switches to white.
This metric is a good one to keep on your radar.
In the news…
If you’re interested to learn more about crypto trading, macro analysis, and on-chain metrics, you can get a free intro course and access to a crypto chatroom run by my friends at Bulls on Wall Street.
Resources I Use
I use Glassnode for all the metrics I track on the Bitcoin network. Their platform is extremely user friendly and fun to use.
Binance is the main exchange to trade the crypto markets.
Coinsquare offers Bitcoin trading in Canadian dollars and is one of the top exchanges in Canada.
I use Tradingview daily to analyze trading charts and find areas of support and resistance.
I use TokenTax to calculate my crypto taxes at the end of the year. They plug in directly to the exchange you use through an API. After you get the full report you can send it to your accountant or have their accountants finalize everything.
Nothing in this article is investment advice. I’m not a financial advisor. Do not make investment decisions based on what is in this article or any other article written by BTC News or Blockedia.