While this weekend’s US storm disrupted bitcoin mining, as higher costs hit profitability and prompted companies to cut computing power, or hash rate, crypto traders will focus on a metric known as the Hash Ribbon, an indicator built on the premise that the price of the largest cryptocurrency often bottoms out during periods of what is known as miner capitulation.
In the past, periods when miners were forced to slow down or shut down machines have preceded stronger phases for bitcoin when conditions stabilize. This is reflected in the Hash Ribbon, an indicator that tracks the 30-day and 60-day moving average of hash rate, on Glassnode.
Capitulation is signaled when the short-term average falls below the long-term average, shown in pink. The worst phase is considered over when the 30-day target crosses back over the 60-day, represented by darker red. Historically, when this recovery coincides with a shift in price momentum from negative to positive, characterized by a transition from dark red to white, it has coincided with long-term buying opportunities.
The hash rate, the total computational power that secures the Bitcoin blockchain, as measured, has dropped about 20%, from about 1.2 zettahashes per second (ZH/s) to approximately 950 exahashes per second (EH/s). This means that the next difficulty adjustment, which is used to maintain consistent 10-minute block times, is expected to drop by about 17%. This would mark the biggest drop in difficulty since July 2021, when China banned bitcoin mining.
Hash Ribbon last showed capitulation in late November when bitcoin formed a low around $80,000. It is now about $88,000.
A comparable pattern emerged in mid-2024. After a Hash Ribbon capitulation and unwinding of the yen transaction, bitcoin bottomed out near $49,000 in August before rising to $100,000 the following January.
During the collapse of the crypto exchange FTX in 2022, bitcoin bottomed out near $15,000 amid the capitulation of miners. As the Hash band normalized, the price rose to around $22,000.
The key question now is whether the pattern will repeat itself and bitcoin will enter a renewed expansion phase as the hashrate and Hash Ribbon begin to normalize.
