When is the best time to buy Bitcoin?
By Gorica Gligorijevic
Willy Woo, who is an on-chain metrics analyst tweeted that Bitcoin’s current charts showed Difficulty Ribbon. That indicator, according to him, points the best time to buy Bitcoin. The ribbon is composed of moving averages on Bitcoin mining difficulty.
“When the ribbon compresses or flips negative, these are the best time to buy in and get exposure to Bitcoin.”
Difficulty Ribbon also gives information on the rate of change in difficulty. According to Willy Woo, this is the sign that Bitcoin will never be at $6,000 again.
The volatility of Bitcoin is really terrifying for most people. Daily movements are something that only rare and good nerves can handle. Hey, Bitcoin jumped 20% during one weekend! At the same time, it is so impressive and exciting. Bitcoin dropped for more than $1,000 but it recovered again. What a character indeed! Of course, volatility is the nature of BTC.
But Woo is providing us a deeper insight.
The difficulty Ribbon indicator shows the best time to buy Bitcoin for the long-term.
If you open your eyes you’ll be able to see it too. for a moment and you’ll see the bigger picture. The chart that Woo shared on Twitter clearly shows the ‘ribbon difficulty’ indicator. Historically it has predicted the best times to get exposure to bitcoin during the past ten years.
This is that great moment. The chart shared by Woo, shows how the difficulty ribbon packs and turns overall negative result? It is obvious in the chart where the dark line passes above the weaker lines. This trader explains. He is expecting a Bitcoin miner capitulation next year. That will halve the supply but “add more fuel to the bull market,” as he tweeted. The point here is that reduced numbers of Bitcoin will give more power to this bull market. The BTC price will go up so, this is the right time to buy and hold it.
What is the Difficulty Ribbon?
The ribbon chart moving averages on mining activity, letting us see the variation in bitcoin mining difficulty. It also illustrates how bitcoin mining changes the BTC price.
How does Difficulty Ribbon work?
When the new coins are mined, miners are selling some of them to cover the costs of mining. That results in a bearish price squeeze.
The smaller miners have to sell more to continue producing. But, after some time it grows unsustainable, and they capitulate. So, after that happen only the powerful miners are in the scene. The hashing power and network problems are lessened (that is ribbon compression) and the powerful miners will sell fewer coins to cover costs. That provides more space for bullish price movements.
When this indicator is visible?
This indicator is visible at the end of bear periods and after miners capitulation. That is the time when miners lessen their selling demands which allow Bitcoin price to resolve and then rise more.
Miners capitulate in bear periods. But it can happen when they mined only half the coins for the costs of the full mining and the Bitcoin market price didn’t achieve that level yet. The compression is visible after each halving in producing as there are fewer miners.
The first who described the Difficulty Ribbon indicator was Vinny Lingham in 2014. So, it was 5 years ago. Now, we have 10 years of historical data. Long enough to make sense to predict that this is the right time to buy and hold Bitcoin at least until next year. According to the Difficulty Ribbon indicator in the charts.