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In today’s analysis, we cover the dynamics of the mining industry, with a particular focus on hash tapes as a market indicator. We’ve covered the Hash Ribbons market indicator several times in previous daily issues, especially on August 10, titled “One of the Biggest Indicators for Bitcoin Flashes,” before bitcoin rallied 50% over the next three months.
Hash tapes take the 30- and 60-day moving average of the Bitcoin hash rate, which is used to determine when sufficient miner capitulation has occurred.
Bitcoin hash tape “buy” signal shown in red.
Hash tapes serve as an effective and historically accurate buy indicator for bitcoin, as they use changes in bitcoin’s hash rate to measure the capitulation of miners in the bitcoin market.
During times when mining operations shut down their rigs, it shows that it is not profitable to mine. The hash rate drops, blocks are mined slower than the 10-minute block goal, and the difficulty will eventually adjust downward to encourage those miners to log back in.
Average Bitcoin Hash Rate and Monthly Growth
Bitcoin mining difficulty has been adjusted down twice in a row for the first time since summer 2021
In the two most recent bouts of difficulty, the short-term trend has been a lower hash rate. Still, if we are in a secular trend of increasing hash rate, expect that mining-related stocks and bitcoin mining machines themselves are likely to underperform the bitcoin asset. during periods when the hash rate increases faster than the price of bitcoin. This is due to the inelastic issuance of the asset in an increasingly competitive global mining arms race.
