Hash rate changes hidden mystery, BTC bottom-hunting opportunity really came this time?

Text: Simplified currency city

Source: Shallot blockchain

Editor's Note: The original title is "Hash rate change hidden mystery, BTC bottoming opportunity really came this time"

Cryptography currency analyst Charles Edwards recently pointed out that the recent changes in bitcoin hash rate data suggest that miners have to meet the "destiny choice", and continue to resist and bear losses, so I hope you don't miss it. The next round of bull markets, which may come soon, is still “vesting in the burden” and temporarily withdraw from the market. Miners may need to make their own choices as soon as possible. According to Charles, there may be as many as 60% of the miners bid farewell to the market in the short term.

In the tweet, Charles posted the immediate performance of his ongoing attention to the Hash Ribbons. Charles pointed out that the Hash Ribbons indicator has been extremely rare in recent times. Because the indicator has been running laterally below 0.5% for more than a week, but has not broken below the 0 axis, which shows that the miners have been struggling for some time in the past, and have not made the choice of whether to "surrender."

The indicator shows the trend of the bitcoin hash rate by quantifying the relative growth rate of the hash rate. The specific value is the difference between the nearest month average of the bitcoin hash rate minus the average of the past two months divided by the one-month average data. The data presented in the following figure shows the situation of crossing the 0 axis every time, which means The one-month moving average and the two-month moving average have crossed, and the one-month moving average of the hash rate has fallen below the two-month moving average, meaning that the bitcoin hash rate is in a phased downward trend in the recent period. At the same time, the appearance of such a negative value also means that the miners have escaped from the market.

The case where the "relative growth rate" of the hash rate is less than 2% for one week is marked with a red dot in the figure below.

Although the probability of the miners leaving the scene after the early warning signals has not been high, but if all the similar scenes since the birth of Bitcoin were counted, in fact, more than 60% of the opportunities for the miners fled the market. Perhaps the sample size is not big enough. After all, Bitcoin has been born for only ten years, but this does not mean that this market performance has no reference value.


Potential "miners surrender"

What does it mean for the market?

Maybe this thing sounds terrible, but for investors, it may actually be an excellent opportunity for bargain-hunting.

Charles Edwards pointed out in a blog post titled <Bitcoin Bottom Fishing with Miner Capitulation> in Medium in early August that there is actually a bit of a seemingly unrelated bitcoin price and hash rate. Awkward contact. Looking back at the historical performance, it can be found that shortly after the miners' concentrated departure, the market will often usher in a new low point of Bitcoin (as shown below).

Of course, the investment signal given by this investment strategy has a very low frequency. In the eleven years since the birth of Bitcoin, only nine buy signals have been given so far. The last time a similar signal was traced back to half a year ago. . Therefore, every opportunity should be especially cherished.


So how should the opportunity be grasped?

Take the market performance after several “miners surrender” in history as an example. If you buy Bitcoin the first time after every Hash Ribbons indicator falls below the 0 axis, the return that the investment can ultimately provide, And the risks to be assumed are as shown below:

To put it simply, it is the first time that the market has given the first nine “miners surrender” signals to buy bitcoin. The average yield of this investment to the peak of the next market cycle can exceed 5000% (50 times). The average period of positions is less than three years. From the perspective of the maximum retracement, although the largest retracement of these investments has reached 42%, the average retracement is only about 11%, compared to 50 times the average return. It is not difficult to accept the withdrawal level.

However, we can still further optimize this strategy. If we wait for the “miners to surrender” situation, the “relative growth rate” of the hash rate will return to positive value, that is, after the market has come out of the “crash” situation, To buy Bitcoin, the results will change as follows:

The most obvious point is that the extreme situation of the 42% retracement was greatly revised. After adopting this correction strategy, the maximum retreat of the same wave of market investment plummeted to 15%. The average maximum retracement of the overall nine chances dropped to 9%, and the average income has not declined, but has been further improved.

It should be noted that the above ROI is only calculated to the actual performance of the peak of the first market cycle after the buy signal, but if there is a short-term position layout after the purchase signal appears in the asset allocation process, If the long-term position is configured, the overall return on investment will be further improved.

It can be seen that with the Hash Ribbons indicator once again infinitely close to the zero axis, Bitcoin's "bottom chance", this time may not be far from us.