A historical indicator may be pointing to a “buying opportunity” for Bitcoin and subsequently altcoins which have remained correlated to Bitcoin so far in 2022. For the first time in more than a year, the Bitcoin mining difficulty ribbon, which consists of short-and long-duration simple moving averages on the mining difficulty, has contracted, signaling miner capitulation.
According to data given by analytics company Glassnode, the ribbon compression marked the end of prior bear markets, including the one that occurred in 2014. The Bitcoin ribbon data set has previously been demonstrated to be an ideal entry point signal. However, it is assumed that history might repeat itself in this situation.
“Miner capitulation’’ might imply less selling pressure, which promotes price stability and eventually a bullish rebound. To pay for operating expenses, miners frequently sell the coins they have produced, adding to market bearish pressure.
Here Is What To Consider
While this might give battered bulls hope, the positive signal should be interpreted in light of macro factors that indicate a limited likelihood of a sudden bullish reversal.
Officials from the U.S. Federal Reserve indicated on Wednesday that additional monetary tightening is required to contain inflation, contradicting market expectations that the central bank will scale back rate increases shortly and turn to easing. This year, the Fed’s tightening of liquidity has agitated the asset markets.
The difficulty ribbon is also entirely reliant on miner flows, which now make up a small fraction of the market overall and thus may be a less reliable indicator than they were before 2020. Due to growing institutional interest over the past two years, bitcoin has developed into a macro asset.
At the time of publication, the leading cryptocurrency by market value, Bitcoin, changed hands near $22,551, down 3.71 percent in the last 24 hours. Ethereum (ETH) was trading down 3.30 percent on the day while other cryptocurrencies were mainly down. The tokens for BNB Chain (BNB, +1.32%), Flow (FLOW, +32.33%), Tezos (XTZ, +2.43%), Fantom (FTM, 4.45%), and Enjin coin (ENJ, +4.25%) were exceptions, all of which saw a modest increase over the last day.
In other news, cryptocurrency will now be directly available to institutional investors thanks to a partnership between asset management behemoth BlackRock (BLK) and cryptocurrency exchange Coinbase.
