Do you know the best time to buy bitcoin? The volatility of the bitcoin can frighten and it’s a matter that leaves many investors afraid of the cryptocurrency. However, if seen through another perspective, the fluctuation of values can be a good trick in the long run. Recently, the on-chain analyst Willy Woo has developed a graph that points out the best opportunity windows to buy bitcoin and how to have long-term return.
Baptized as Bitcoin Difficulty Ribbon, the system uses an indicator called ribbon difficulty (ribbon interface difficulty). In this way, he was able to identify which were the best purchasing moments over the last ten years.
The indicator was able to accurately predict the market decline at the end of 2018 and the beginning of 2019. He claims that the ideal would be that investors had begun to accumulate at that time.
“When the line compresses, or inverts negatively, this is the best time to buy and get exposed to the bitcoin. The ribbon consists of simple moving averages in mining difficulty so that we can easily see the rate of change in difficulty”, says Woo.
What is the best moment to buy bitcoin?
According to the analysis of Willy Woo, the perfect time to accumulate bitcoin is when the difficulty of the ribbon compresses (gets too thin) or inverts negatively (when the strong and dark line crosses above the weaker lines).
According to him, this is a confirmation based on data from an investment strategy of decades: buy when there is blood on the streets. In other words, the recommendation is that investors buy assets when others are afraid. On the other hand, they should sell them when they’re being coveted.
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What exactly is the difficulty ribbon?
The ribbon charts move the averages of the mining activity. Thus, it is possible to see the change in the difficulty of the bitcoin mining. Woo also explains that the bitcoin mining itself affects the price of the cryptocurrency.
“As new currencies are mined, the miners sell some of their mined currencies to pay for the production costs. This produces low price pressure. The weaker miners sell more coins to remain operational. Thus, when it becomes unsustainable, they fall, capitulating, and the power of hashing and the difficulty of network diminishes (ribbon compression), leaving only the strongest ones, which sell less, and leaving further space for a higher price movement”, emphasizes the analyst.