Recurring market commentary on what's happening in the crypto markets, summarized by the Crypto Broker team at Crypto Finance AG.

Market commentary

Good Morning!

We are back to the “chicken & egg” dilemma: Does the hash rate follow the price or is it the other way around? I do not have an educated opinion on this. But I do see a possibility of playing the current market structure. I believe that retail traders tend to believe that “the price follows the hash rate”.

Bitcoin hashrate over past 3 years / Source: Ycharts

Usually, retail traders look for indicators that give them the illusion of being able to find a buy/sell signal before the price reacts. With the hash rate, they might have found an indicator that works in the very short term, but this is because it’s a self-fulfilling prophecy.

Bitcoin price vs. hash rate (orange line) / Source: Tradingview

I think that for the medium-term investment horizon, retail players will have to buy back their shorts when the “in transit” (from China to any more friendly crypto mining country) mining rigs start getting plugged in again (at a different location). Hash rate will go up pretty quickly as soon as the machines are back online.

My point: since the crypto market is still dominated by retail investors, it is important to understand their intentions and pain points. Additionally, I always try to find other indicators (which are largely ignored by retail traders) to see if they support my counterview. In today’s case I did an on-chain analysis (coin movements).

There are two important points that indicate that “smart” money is accumulating at the current levels. We are still seeing net outflows of coins from the prominent fiat ramp exchanges (Coinbase, Kraken, Bitstamp, and FTX). And we see that mining wallets not moving coins to exchanges.

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