While the US storm over the weekend affected bitcoin As higher costs impact profitability and lead companies to reduce computing power, or hashrate, cryptocurrency traders will focus on a metric known as the Hash Ribbon, an indicator based on the premise that the price of the largest cryptocurrency often bottoms out during periods of what is known as mining capitulation.
In the past, periods where miners were forced to slow down or shut down machines preceded stronger phases for bitcoin once conditions stabilized. This is reflected in the Hash Ribbon, an indicator that tracks 30- and 60-day hashrate moving averages, on Glassnode.
Capitulation is signaled when the short-term average falls below the long-term average, shown in light red. The worst phase is considered over once the 30-day measure crosses back above the 60-day measure, represented by darker red. Historically, when this recovery aligns with a change in price momentum from negative to positive, marked by a transition from dark red to white, it has coincided with long-term buying opportunities.
The hashrate, the total computational power protecting the Bitcoin blockchain, as measured, has fallen by approximately 20%, from around 1.2 zettahash per second (ZH/s) to approximately 950 exahashes per second (EH/s). That means the next difficulty adjustment, which is used to maintain consistent 10-minute block times, is expected to decrease by about 17%. This would mark the biggest drop in difficulty since July 2021, when China banned bitcoin mining.
The Hash Ribbon last showed capitulation in late November, when bitcoin hit a low of around $80,000. Now it’s around $88,000.
A comparable pattern emerged in mid-2024. Following a Hash Ribbon capitulation and the decline of the yen carry trade, bitcoin bottomed near $49,000 in August before rising to $100,000 the following January.
During the collapse of the FTX cryptocurrency exchange in 2022, bitcoin bottomed near $15,000 amid miners’ capitulation. Once Hash Ribbon normalized, the price recovered to around $22,000.
The key question now is whether the pattern repeats itself and Bitcoin enters a renewed expansionary phase when the hashrate and Hash Ribbon begin to normalize.
