Altcoin News: The Analyst Has Developed a Model for Buying Bitcoin Based on the Mining Difficulty

August 2, 2019, by Marko Vidrih on ALTCOIN MAGAZINE

Analyst Willy Woo in his Twitter published a model called “Bitcoin Difficulty Ribbon”, which can help investors determine the best moments for buying cryptocurrency based on the behavior of miners.

As Woo explains, historically it was better to buy Bitcoin when the Ribbon was shrinking or rushing down.

The Ribbon consists of simple moving average mining difficulty. The indicator reflects the influence of miners on the cryptocurrency price. As new coins are mined, miners sell part of Bitcoins to finance their operations, which creates negative pressure on the price.

The weakest miners are forced to sell more to stay afloat. When this is not enough, they capitulate, hash power and mining complexity fall (the Ribbon is compressed). Strong miners, on the other hand, continue to work and sell less, leaving room for growth.

As a rule, this separation occurs at the end of the bearish cycle, when miners capitulate, and the reduction in selling pressure allows prices to stabilize and subsequently start to grow.

In addition, miners tend to capitulate during the reduction of the reward for the block, when simultaneously for the same amount of work they begin to receive half the number of coins, and market prices have not yet had time to react to the latest changes.

Woo also draws attention to the similarity of the structures of the bull market in 2012 and 2019, which was preceded by a colossal capitulation of miners (the Ribbon went down) and the accumulation period.

“This bull market has resembles 2012 more than 2016 structurally,” adds Woo.

Author: Marko Vidrih

Images credit: Twitter — Willy Woo