On-chain data shows the Bitcoin Hash Ribbons have recently gone through a crossover. Here’s what it could mean for the cryptocurrency.

Bitcoin Hash Ribbons Suggest Miner Capitulation Is On

As explained by CryptoQuant community manager Maartunn in a Quicktake post, miners are capitulating right now if the Hash Ribbons indicator is to be believed. This on-chain metric is generally used to determine whether miners are in distress.

BTC runs on a proof-of-work (PoW) consensus mechanism where miners play the role of validators and compete against each other using computing power to get a chance to add the next block to the chain.

This computing power, when measured across the network, can provide insight into the health of the miners as a whole. Due to this reason, the Hash Ribbons indicator makes use of this total Bitcoin “Hashrate” to judge the situation of the miners.

Naturally, a rise in the Hashrate suggests the network is attracting miners right now, while a decline could imply low profitability is making some of these validators pull out from BTC.

The Hash Ribbons indicator uses two moving averages (MA) of the Hashrate, 30-day and 60-day, to represent whether these behaviors are particularly intense or not at the moment. When the 30-day ribbon moves under the 60-day one, it suggests that miners are mass capitulating. On the other hand, the opposite cross suggests network is observing growth again.

Now, what relevance do these trends have for Bitcoin? According to Charles Edwards, the creator of the Hash Ribbons, the miners have historically been quite resilient, and they only quit when things get especially bad for the cryptocurrency. As such, the market may be more likely to approach a bottom whenever these chain validators show capitulation.

Below is a chart that shows how the miners’ behaviour has looked recently according to this indicator:

As Maartunn has highlighted in the graph, the Bitcoin Hash Ribbons have seen a crossover recently. More specifically, the cross has involved the 30-day moving under the 60-day, implying that the miners are capitulating.

Miner profits come down to three factors: BTC spot price, transaction fees, and electricity costs in the area that they are located in. Historically, the fees has been quite low in comparison to the block rewards, so miner financials have been dependent on the price (as the block rewards only have this variable attached to them) and electricity prices.

Recently, the BTC price has been stuck in consolidation while the block rewards have been slashed in half in the latest Halving event. This has led to tightening revenues for these chain validators, so it’s not surprising to see that the miners with the least efficient machines have already started ditching the network in hordes.

In the chart, past instances of miner capitulation are shown with the green lines. It’s visible that while miner capitulation has generally indeed occurred near profitable buying points into the asset, these bottoms haven’t immediately appeared after the crossovers have occurred. As the analyst notes, “It unfolds in the subsequent days and weeks after less efficient miners throw in the towel.”

BTC Price

Bitcoin has continued to move overall flat over the past week as its price is still trading around $62,700.

Jim Cramer, the outspoken host of CNBC’s Mad Money, has caused a stir in the financial sector by endorsing Bitcoin (BTC) over MicroStrategy stock (MSTR). This recommendation follows despite MSTR’s notable year-to-date performance of 85%, compared to Bitcoin’s 125% gain.

Cramer’s endorsement, however, is met with a dose of skepticism. The financial guru is known for his sometimes-inaccurate predictions, with some even claiming his recommendations have the opposite effect – a phenomenon known as the “Inverse Cramer” theory.

MicroStrategy Doubles Down On Bitcoin

While Cramer throws shade at MicroStrategy, the company remains a staunch Bitcoin advocate. CEO Michael Saylor is a vocal “Bitcoin Maxi,” holding a significant personal stake in the cryptocurrency and spearheading the company’s hefty BTC acquisitions. This unwavering commitment stands in stark contrast to Cramer’s sudden shift.

Jim Cramer on Bitcoin: If you want bitcoin, don’t buy $MSTR MicroStrategy. Buy bitcoin$COIN $HOOD $BTC $ETH $DOGE $MARA $CLSK $BITF $RIOT https://t.co/M1D6qKVKLs

— Hardik Shah (@AIStockSavvy) May 13, 2024

Bitcoin ETF Outflows Cast A Shadow

Cramer’s advice also coincides with a period of uncertainty for Bitcoin ETFs. Grayscale, the largest Bitcoin ETF management company, has seen a recent exodus of investors due to fees associated with their product. Additionally, newly launched Bitcoin ETFs in Hong Kong have experienced more redemptions than deposits for several days, indicating a cautious investor sentiment.

Adding fuel to the fire, the Bitcoin market itself is facing headwinds. A recent price drop below $62,000 is accompanied by substantial sell pressure on spot markets, raising concerns about a potential downward trend.

With Cramer’s past record and the “Inverse Cramer” theory swirling, some investors might be hesitant to follow his current Bitcoin recommendation. If history repeats itself, his endorsement could unintentionally trigger a sell-off.

Despite the uncertainty surrounding his call, Cramer’s foray into the Bitcoin conversation has a silver lining. Discussions about cryptocurrency by prominent figures like Cramer can raise public awareness about blockchain technology, potentially attracting new investors to the digital asset space.

Cramer’s sudden shift in stance towards Bitcoin leaves investors in a quandary. While Bitcoin offers higher potential returns than MicroStrategy stock, recent market trends and Cramer’s own track record suggest a degree of risk. Ultimately, the decision to invest in Bitcoin directly or through MicroStrategy remains a gamble in a currently murky market.

Featured image from Pexels, chart from TradingView