Based mostly on CryptoQuant data, one observer notes that every time the Bitcoin hash fee data new highs, as is the case in late January 2023, coin costs are inclined to retrace because the upside momentum fades.
Extending this preview on present BTC charges, the analyst predicts that costs might rise above the present resistance degree at $23,800 to $25,500 earlier than dumping under quick help strains in the direction of $20,000, or worse.
Hash Fee Peaks Are Promoting Indicators?
Per his evaluation, increasing Bitcoin costs would encourage extra customers and mining farms to energy on their rigs, additional pushing up the hash fee. Based mostly on his concept, the rising hash fee can be a precursor of sturdy liquidations which will unwind mining exercise, knocking down costs.
On January 26, the Bitcoin hash fee increased to 305 EH/s, an all-time excessive. Hash fee is the overall computing energy related to the Bitcoin community. On the present tempo, a brand new degree will possible be registered if BTC costs proceed pumping.
Whereas there seems to be a direct correlation between the spot BTC value and hash fee, the observer, citing on-chain information, thinks the other is true. He’s satisfied that peaking bitcoin hash charges can diverge with costs, impacting coin valuation.
BTC simply hit new ATH, and plenty of may make you consider it is a bullish signal, however I’ll present you that it all the time had fairly the other impact. I’ve been utilizing hash fee all-time highs as bearish alerts all through 2022 with excellent outcomes. You may see all new ATHs. Even in the event you return to 2021 ATHs on a dwell chart, you will notice that each one signaled an imminent selloff.
Notably, the analyst identified events in 2021 and 2022 when rising hash charges led to important value retracements after strong rallies. In seven occasions, the common selloff was a 19.5% drop in costs, with the deepest being 37%. Previous this correction, he provides, the coin’s valuation tends to submit an 11% most acquire. From present Bitcoin costs, this locations the coin above $25,000.
Bitcoin Mining Clusters Are Forming
Earlier than costs broaden, “clusters of intense Bitcoin mining exercise,” are inclined to type, as is presently the case. Due to miner involvement, the hash fee strikes up in tandem in fast succession, registering an all-time excessive. Nevertheless, the sharp exercise in mining and enlargement of the hash fee led to sturdy selloffs, on common, inside 9 buying and selling days.
Per the present Bitcoin formation, the enlargement in BTC costs above $25,000 might precede a cool-off, presumably forcing the coin again to $20,000 or, worse, $14,500 from early February 2023.
Characteristic picture from Canva, Chart from TradingView