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How to determine the best time to buy bitcoin using a “complexity tape”
As you know, miners are the most important participants in cryptocurrency networks based on the Proof-OF-WORK algorithm. Carrying out complex calculations and burning a huge amount of energy, they confirm transactions and protect the network from different types of attacks.
However, do not forget that miners are also one of the largest sellers in the market, since cryptocurrency mining – costly process and coins must be periodically sold to cover costs.
The hashReite and the complexity of https://gagarin.news/ the bitcoin network depend on the number of miners and the productivity of the equipment, which quite closely correlate with the price of digital gold. Equipment for the production of cryptocurrencies is constantly being improved and against the background of a bear market or crashing a reward for the block part of the miners is simply unsuitable for further operation (unless, of course, access to free electricity or the heat generated is not used for heating greenhouses).
Analyst Willy Wu took into account various variables and, observing changes in the complexity of mining and price, created a tool that visualizing periods for the most successful investment in the first cryptocurrency. FORKLOG magazine offers to your attention the translation of an article by the researcher about the so -called “Complexity Ribbon”.
Presenting the “Complexity” of Bitcoin. When the tape compresses or decreases, this is the best time to buy BTC. The tool consists of simple sliding medium -sized, based on mining complexity indicators. Thus, with this indicator, we can easily track the dynamics of complexity changes.
Dynamics “Difficulty Ribbon” against the background of prices. Live schedule can be viewed on the website Woobool Charts
How the “Complexity Tape” works
This visualization of complexity indicates the effect of mining on the price of bitcoin. As new coins are mined, miners sell part of them to cover production costs. This creates a bear price price pressure.
The most unproductive miners sell more coins to continue to engage in their activities. When the costs become unbearable, they surrender. Hash-power and the complexity of the network are reduced-the tape is compressed. Only the most productive miners remain, which sell less, opening opportunities for price growth.
As a rule, this can be observed at the end of the bear phases of the market – after the surrender of part of the miners, the low pressure from the sellers allows the price to stabilize and then go in growth. Classical consolidation after reaching the bottom.
An example of a successful period for buying bitcoin after reaching the price of Bitcoin “bottom” at the end of last year. The tape clenched, and then the lines sank down a little down.
Winnie Lingham should thank Vinnie, who, as far as is known, the first back in April 2014 described such dynamics in his article. The material refers to how the price of bitcoin finds equilibrium. Now we have more than 5 years to confirm linger hypotheses.
Miners leave the game not only in the bear market, but also during halving a reward for the block, when only half of the coins suddenly begins at unchanged costs, and the price has not yet time to react properly.
We can easily consider the compression of the tape after each halving (marked with vertical lines), during which some miners are eliminated:
In conclusion, we note that in 2019 and 2012 the nature of the bull market was similar – we observed a mass surrender of positions by miners (that is, the tape went down). As a result, a decrease in the pressure of sellers was replaced by short consolidation, and then a price break took place. Thus, the current bull market in its structure is more reminiscent of 2012 than 2016.
Shortly after the publication of the article described by the indicator, Willy Wu talked with the regulars of the YouTube channel FORKLOG trader and analyst tone Weiss. During the conversation, Wu said that digital gold is unlikely to ever return to the level of $ 6000.
Willy Wu also drew attention to the fact that the indicator lines were last unfolded in December 2018, when the price of bitcoin pushed away from the “bottom” at $ 3200. In addition, the creator of the “Difficulty Ribbon” expressed the opinion that the surrender of miners against the backdrop of the upcoming Halving Bitcoin will only warm the bull market even more.
The arguments of the researcher are not devoid of rational grain. So, the third halving third in a row will lead to a reduction of awards for the block miners obtained by miners. This will reduce the volume of regular issue and thus make the first cryptocurrency even more scarce. Growing demand with an almost unchanging asset of the asset, as you know, pushes the price up.
Most likely, the popularity of bitcoin will increase in the future. The price of BTC will help not only a sharp decrease in inflation, the mass acceptance and development of the crypto industry, but also the global tension, which will force Nokoiners and traditional investors to take a closer look at the new form of money.
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