The volatility of the main cryptocurrency is still too high, so the optimal time to buy an asset sometimes goes by seconds.
Cryptocurrencies are one of the most difficult assets to trade intraday because, unlike more traditional assets, there is no “day” here – the bitcoin market work around the clock. However, Longhash analysts have tried to figure out what time of day is the best time to trade Bitcoin based on data from Coinbase over the past two years.
The analysts looked at the hourly high and low prices for each hour of every day, and then compared each hour to the other 23 hours of every day.
Bitcoin`s prices by time of day Midnight and 1am UTC have been the most volatile hours for Bitcoin prices over the past two years. In particular, there were more daily highs and lows at 1 am UTC than at any other time.
This may be due to the fact that this hour is the beginning of the evening in North America and the beginning of the working day in Asia. This is the period when Western and Asian traders can be active at the same time. Asian traders can wake up and react to the news of the day, while North American traders are still awake and can react to Asian markets.
The study also shows that no matter how much investor wants to find it, there is still no “right” time to buy Bitcoin throughout the day. Over the past two years, one would be more likely to hit a daily low than a daily high when buying in the morning hours (03:00 to 12:00 UTC), but the difference is so small that it would be unwise to accept it as essential for the trading day.
As you know, miners are the most important participants in cryptocurrency networks based on the Proof-of-Work algorithm. By performing complex calculations and burning up huge amounts of energy, they confirm transactions and protect the network from various types of attacks.
However, do not forget that miners are also one of the largest sellers on the market, since mining cryptocurrencies is a costly process and coins need to be sold periodically to cover the costs.
The hashrate and the complexity of the Bitcoin network depend on the number of miners and the performance of the equipment, which are quite closely correlated with the price of digital gold.
Equipment for mining cryptocurrencies is constantly being improved and against the background of a bear market or halving of the block reward, some of the miners simply turn out to be unsuitable for further operation.
Analyst Willie Wu took into account various variables and, observing changes in mining difficulty and price, created a tool that visualizes the periods for the most successful investment in the first cryptocurrency. He called it – Difficulty ribbon.
When the tape shrinks or flips negatively, this is the best time to buy bitcoin. The ribbon consists of simple moving averages of the mining difficulty, so we can easily see the rate of change in difficulty.
How the “Difficulty ribbon” works
As new coins are mined, miners sell part of them to cover production costs. This creates bearish price pressure. Less productive miners sell more cryptocurrencies in order to continue mining.
If the costs do not pay off, the miners leave the industry, then the hash power and the complexity of the network decrease, which means that the tape shrinks. Only productive miners remain on the market, selling fewer coins.
When some of the digital coin miners leave, the low pressure from the sellers allows the price to stabilize and start growing again. The moment when the tape shrinks and is considered, according to Willie Wu, the most appropriate moment to buy the first cryptocurrency.
Miners often drop out when the market is bearish, as well as after another halving.
The tape is compressed at the moment when only half of the coins are suddenly mined, while the costs remain unchanged and the price of the cryptocurrency has not yet had time to react properly and has not stabilized. Therefore, traders should monitor events such as halving and network hashrate changes more closely.
Most likely, the popularity of bitcoin will continue to increase in the future. The price of BTC will be helped to grow not only by a sharp decrease in inflation, massive adoption and development of the cryptoindustry, but also by global tensions that will force nocoiners and traditional investors to look at a new form of money.