Bitcoin Hash Ribbons Indicator (Explained With Past Results)

The Bitcoin Hash Ribbons indicator, created by Capriole Investments, has given great long-term Bitcoin “buy signals” in the past. It combines the fundamental analysis of Bitcoin mining data with the technical analysis of Bitcoin’s price. In this guide, I’ll explain how the Bitcoin Hash Ribbon works and test its historical accuracy for investors. By the end, you’ll know whether to include the indicator in your own strategy – and how to use it if you do.

YouTube Video version of this guide

Hash Ribbons indicator PDF download

You can download the condensed PDF slide deck version of this guide below. Think of the PDF like a Hash Ribbons cheat sheet, summarizing the core concepts of the more detailed written and video versions of this guide.

A quick primer on the Bitcoin hash rate

Before I explain the Hash Ribbons indicator, you’ll need to understand Bitcoin’s hash rate. Put simply, the hash rate is the computing power Bitcoin miners use, measured in hashes per second.

The hash rate rises when more miners compete to mine Bitcoin. Typically, this happens when Bitcoin’s price is relatively high, as there’s more financial incentive for them to mine. The hash rate can also increase when the electricity cost of mining Bitcoin is low compared to Bitcoin’s price. That makes mining more profitable, which increases mining competitiveness (and hence the hash rate).

The hash rate can sometimes go down when Bitcoin’s price drops. Lower prices make mining less profitable, which causes mining activity (and hence the hash rate) to drop, too. The chart below shows Bitcoin’s hash rate in orange. Notice how it’s generally trended up over time, making the Bitcoin blockchain more secure.

Side note: If you’d like a deeper explanation of how hash rates fit into the Bitcoin mining process (and how higher hash rates make Bitcoin more secure), check out our investor’s guide to Bitcoin.

How does the Bitcoin Hash Ribbons indicator work?

The Hash Ribbons indicator gives a long-term “Bitcoin buy signal” over four stages:

• Miner capitulation (gray dot)
• Early miner recovery signs (green dots)
• End of miner capitulation (bright green dot)
• Final Bitcoin buy signal (blue dot).

Here’s how that works:

First – Miner capitulation: Miners start selling more Bitcoin to cover their operating costs. Lower Bitcoin prices and/or higher electricity costs hurt miners’ profit margins, so more miners switch off their machines. That typically causes the hash rate to drop, with its 30-day moving average (bright green line) crossing below its 60-day moving average (gray line). This cross shows downward momentum for the hash rate and triggers the miner capitulation signal. After that, the chart’s red area shows miners are in the capitulation phase. And the 30-day moving average turns red, too.

Side note: Above, moving averages are Bitcoin’s average hash rate over the past 30 and 60 days, updated daily. See our complete moving averages guide here.

Second – Early miner recovery signs: With the hash rate now lower after the miner capitulation signal, mining activity starts to pick up again. As a result, the hash rate starts to recover, which can trigger a few green dots to show up in the chart. But since the 30-day moving average is still below the 60-day moving average, miner capitulation isn’t officially over just yet.

Third – End of miner capitulation signal: The 30-day moving average of the hash rate then crosses back above the 60-day moving average. This signals that miners have officially recovered from the capitulation phase – and Bitcoin’s hashing power has made a strong comeback.

Fourth – Bitcoin buy signal: Here’s where Bitcoin’s price action comes in as a final confirmation to buy Bitcoin. You’ll want to see the 10-day moving average of Bitcoin’s price (teal) be above the 20-day moving average (yellow) for the final buy signal (blue dot). The moving average cross shows positive buyer momentum.

Potential paths to the “Bitcoin buy signal”

Now, there are a few different paths to get to the final Bitcoin buy signal. For example, you could see a scenario where the “end of miner capitulation” signal flashes bright green, and then miners capitulate again. The “end of miner capitulation” signal could also happen while Bitcoin’s 10-day moving average is already above the 20-day moving average – which would immediately trigger the buy signal. But if those moving averages haven’t crossed yet, you’d need to wait until they do before you see the blue dot.

The diagram below explains the different pathways this could take. But here’s the key point: you need the shorter-term moving averages of the hash rate and the Bitcoin price to both be above the longer-term ones.

How well has the Hash Ribbons indicator performed in the past?

Since 2013, there have been 14 blue dots (or Bitcoin buy signals), with 64.29% turning a profit. The average trade lasted 253 days (assuming you excited each trade on the first “miner capitulation” after each buy signal). As the chart below shows, the strategy has beaten a simple Bitcoin “buy-and-hold” one (blue line) since 2013. Keep in mind that these are only back-tested results – that doesn’t mean future results will be the same!

How to use the Bitcoin Hash Ribbons indicator in TradingView

If you fancy trying the Hash Ribbons indicator out yourself, it’s free on TradingView. You can use it by searching “hash ribbons” in the “indicators” section. I’ve laid out those steps in the screenshot below. You can also check out our free TradingView tutorial if need a head start with that.

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As usual, none of this is investment advice. You can read our full disclaimer here. 

Key Takeaways

• The Bitcoin Hash Ribbons indicator combines the fundamental analysis of Bitcoin’s hash rate with the technical analysis of Bitcoin’s price.
• Since 2013, the indicator has given a profitable Bitcoin “buy signal” in about every 2 out of 3 trades (over 14 trades in total).
• While past performance doesn’t guarantee future results, the hash ribbons indicator has a decent track record so far.