You often wonder when the market falls whether to BUY or NOT to BUY. This is precisely the dilemma that is important to resolve in order to make the right choice in the crypto to invest in and obtain the expected profits. But wait, when it comes to MAKING SUCH AN IMPORTANT DECISION and for it to be RIGHT, it will be better to have the best indicators in your favor.
That is why we are going to analyze what it means when an indicator like the HASH RIBBONS starts to indicate BUY BUY BUY and we are going to do so with historical data to take advantage of it in DECISION MAKING.
Let's take a quick look:
This indicator is based on the hash rate, which is a measure of the total computational power that miners are devoting to the Bitcoin network (you can find it on TradingView). Hash Ribbons are derived by using two moving averages of the hash rate: one short-term and one long-term. Interpreting the buy and sell signals generated by this indicator can be as much an art as it is a science, and this is where the genius of the professional trader comes in.
To understand the meaning of the Hash Ribbons, we must first understand the hash rate. This rate reflects the health and security of the Bitcoin network; a high hash rate suggests a strong and secure network. When miners turn off their machines due to low profitability, the hash rate decreases, which can signal a buying opportunity for astute investors. This is because mining capitulation often precedes a period of Bitcoin price recovery, as the remaining miners enjoy higher rewards and the network becomes more efficient.
On the daily time frame, a Hash Ribbons buy signal can emerge when the short-term moving average of the hash rate crosses above the long-term moving average. This indicates that mining capitulation may be ending and that a surge in the hash rate is on the way, which could precede a surge in the Bitcoin price. However, it is of utmost importance not to act rashly based on a single signal. Confirmation with other indicators in a broader market context is essential to make investment entries.
Now, this indicator is mainly considered for long-term decision making to accumulate #Bitcoin or other strong cryptocurrencies that graphically converge with BTC (ETH, BNB, SOL, DOT, LINK).
On the other hand, on a one-week time frame, Hash Ribbons signals should be interpreted equally cautiously. A buy signal on this time frame suggests a more established and possibly more reliable uptrend.
But what does it mean?
An interpretation based on the historical activation movements of this indicator suggests that it may take a few weeks from the time it is activated on the weekly chart until the upward movement begins. For example, it was activated in June 2020 and it was not until October of the same year that the upward movement began from $8,600 to $64,900.
Still, we need to keep an eye on other signals, such as the macroeconomic context and how it affects the crypto market, the drop in interest rates in the US, the election in that country, a possible stagflation (as suggested by Cathie Wood), the summer holidays in Europe (which decreases the flow of liquidity in the markets), the tensions of the Russia-Ukraine war.
However, even though the outlook may be overwhelming for both Bitcoin and certain altcoins, this market will undoubtedly end up benefiting from the war against the dollar, from the fall of traditional markets, since according to several indicators including this one we are analyzing, the market is preparing for a rebound (without warning) and as always, patience is essential, as well as taking advantage of the coming wave and understanding that there is more use in the medium and long term by making small averaged investments and keeping in mind that profit taking is as important as risk management.
On the other hand, there are capital outflows from large investors holding Bitcoin and how we could interpret this together with the macro context and the Hash Ribbons, the outflows could possibly become asset buybacks, just as Warren Buffett did before the recent fall of the Japanese stock market.
Now, if we look at the daily chart, it is impossible not to notice that the Hash Ribbons always gave a buy signal before a fall and then began its rise.
This phenomenon can occur due to the dynamic nature of the hash rate and the market's reaction to external news and events. A buy signal does not immediately guarantee a substantial increase in price; there may be a delay between the signal and the market action. In addition to other macroeconomic factors or broader market movements can influence the Bitcoin price independently of technical signals as we noted above.
In short, the Hash Ribbons is a valuable technical indicator that offers insights into the health of the Bitcoin network and potential trading opportunities. Let us not forget what Warren Buffett's mentor Benjamin Graham said that one should be greedy when the market is panicking and one should be afraid when the market is greedy and these days the market is panicking.
These are times of reading.
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