Hash Ribbons Indicator: Complete Bitcoin Trading Guide

Hash Ribbons Indicator: The Complete Guide to Bitcoin Trading

If you have ever tried to understand the regularly changing chart of bitcoin value, then you realize that it can be similar to trying to read a foreign speech. The changes have a chance to look random and unpredictable, which makes bitcoin investing dangerous and intimidating. Perceiving the bitcoin hash rate can help you understand the swings in trading, especially if they are similar along with the hash rate transformations. What is bitcoin hash and which bitcoin pointers are associated with it? Simply put, hash measures how fast the Bitcoin line is at processing transactions and solving difficulties in order to form new blocks. The largest hash shows in the most robust line and correlates with the stability of the bitcoin value. This publication can help you fully understand the bitcoin hash rate and in this case, as well as how someone has a big impact in the mining procedure, which will enable you to make weighty decisions about investing or participating in bitcoin mining.

Bitcoin Magazine Pro's solution, “Bitcoin Analysis”, is considered essential to making your fuller decisions. This source can help you understand the bitcoin hash rate and other metrics in the chain in order to argue your own bitcoin investment strategy.

What is the Hash Ribbons indicator?

• Hash Ribbons is an indicator designed to determine the global bitcoin price bottom.

• The metric assesses market sentiment and the possibility of miners capitulating due to a drop in the price of the first cryptocurrency or an increase in mining operating costs. 

• Hash Ribbons is based on the assumption that miners are the most resilient industry participants to shocks and sensitive to market recovery.

Who developed the Hash Ribbons indicator?

Hash Ribbons was developed by Charles Edwards, founder of Capriole Investments in 2019. The creation of the metric was preceded by his earlier work on a way to determine bitcoin's price floor based on network hash data (Hash Rate Capitulation).

Edwards capitalized on the work of analyst Willie Wu, who proposed the Difficulty Ribbon Compression indicator based on the Difficulty Ribbon. He combined both approaches into one concept.

What is miners' capitulation?

In the context of the Hash Ribbons indicator, miner capitulation refers to the moment when equipment maintenance and energy costs exceed the price of the mined cryptocurrency for 1-2 months.

Based on the bitcoin hash, Hash Ribbons signals the anticipated capitulation of miners. In other words, the indicator indicates the disconnection of a significant part of the equipment from the network.

Rationale for the Hash Ribbons indicator

Edwards suggested that bitcoin price and mining costs are inextricably linked to hash rate. The lower the price and higher the costs, the fewer miners remain in the network. Conversely, the higher the price and lower the costs, the more interest is seen from participants in the process.

Since Hash Ribbon relies on average bitcoin hash data, the indicator is suitable for analyzing long-term trends and finding market entry points.

The lagging nature of the metric's formation does not allow you to effectively use it to identify favorable moments to sell bitcoin.

How to use Hash Ribbons

The Hash Ribbon chart is plotted using two simple moving averages (SMAs) for the daily bitcoin hash rate with periods of 30 and 60 days. When the 30-SMA crosses the 60-SMA from top to bottom, it indicates the beginning of miners' capitulation. A crossing from bottom to top is a buy signal.

According to Edwards, in 2015, the Hash Ribbon indicator showed a “bad” entry point - the price of bitcoin fell by 42%. A similar scenario was repeated in 2019, 2021 and 2022.

According to Edwards, such “bad trades” can be avoided by adding simple moving averages (50-SMA, 200-SMA) for the bitcoin price. The simultaneous use of the two tools will help reduce risks.

How is this bitcoin plan calculated?

Bitcoin's difficulty changes approximately once every two weeks, or, to be correct, once every 2016 construct. The source is usually cultivated in the Bitcoin blockchain once every 10 minutes.

But the hash is calculated every day, for this reason providing us with insight into miner activity (health) in the absence of such a significant lag from Bitcoin's Complexity fixes.

The Hash Ribbons bitcoin indicator applies elementary day moving ordinary (DMA), to establish if the hash is located in a powerful downtrend. Some also apply them to establish if the hash rate starts to pick up from a downtrend, which can be very useful for strategic bitcoin investors.

The Hash Ribbon chart demonstrates that the numerous defeat of miners is usually completed if the 30-day moving mediocre (30 DMA) of the bitcoin hash rises again before the 60-day moving typical (60 DMA) after falling below it.

Risks of using the indicator

Despite the fact that Hash Ribbons is very popular among crypto market participants, you should not rely on it as the only analysis tool:

• Hash Ribbons uses the network hash to generate a signal, the value of which is approximate and very volatile. Inaccurate calculations may lead to incorrect conclusions.

• According to statistics, from the moment a buy signal is formed, the bitcoin price can decrease by 3-42%.

• The ban on bitcoin mining in a number of countries will affect the hash of the network and distort the algorithm of the indicator.

• The emergence of new bitcoin mining equipment or cheap energy sources will force inefficient miners to leave the market. If the network hash does not change, Hash Ribbons will not notice the capitulation of miners and will not give a buy signal.
  

Conclusion

Understanding what hash is, how to use it to determine the most profitable devices for mining cryptocurrency, as well as how to “overclock” it on specific devices, you can tangibly increase your income.

Unfortunately, now the mining of bitcoin and altcoins by PoW mining, although relevant, but rather considered as a long-lasting investment. The complexity of algorithms is increasing, and bitcoin and altcoin prices are stagnant at best.

You will get an opportunity to improve your trading results by understanding how to correctly calculate the risk/profit ratio, learn how to earn income even with 20% of successful trades and learn other equally useful tricks. Have a great balance!

FAQ

What are Hash Ribbons?

A unit of measurement of the processing power of a device that mines cryptocurrency. The processing device receives an array of data, and the speed of its processing and search for the necessary key is the hash rate.

The higher the hash rate the better?

The higher the Hash, the better the chances of finding the token. Hash is higher in more powerful devices, which are capable of processing massive data sets at speeds of up to 100,000 hs/second.

What does the hash rate depend on?

On cryptocurrency. Different coins use different encryption techniques, which can cause the hash rate to vary.

What is Bitcoin's hash rate?

Bitcoin hash rate is the speed with which the miners' computing technique solves cryptographic tasks. It is measured in hashes per second (H/s) and reflects the total processing power of the bitcoin network.

Why should you care about Bitcoin hash?

If the hash on the Bitcoin network is high, it means that the network is safe and healthy. This is reassuring to investors who will not want to put money into a network that is not safe. 

What happens when the hash drops?

A significant drop in hash can happen for a variety of reasons but generally represents changes or risks to the network. In bear markets, some miners may struggle to make a profit and shut down their mining rigs. On a large enough scale, this significantly reduces hash rates.

Another event that caused a significant drop in hash was the Chinese government's ban on Bitcoin mining. This event forced Chinese miners to move their mining equipment outside of China, which caused a significant short-term drop in hash.