The second one, definitely. Bye, beautiful.
I would translate A beautiful goodbye as Un bel saluto or Un bell'addio (masculine --- I'm not sure why, but in practice these kinds of salutations and interjections all get the masculine), and What a beautiful goodbye to Che bell'addio. All of these sound a bit awkward to my ear.
You can also say un bel ciao (again masculine --- as can be seen also in the recently popular meme ciaone), but I would take it to mean "a nice, friendly salutation with the word ciao". Note that ciao in Italian does not have the meaning of "farewell / final parting salutation" that goodbye has in English. If you wish to stress the fact that you won't see someone ever again, you use the more dramatic addio. So in the text of this song it's just a casual salutation.
As @DenisNardin points out in a comment (thanks!), the word ciao in Italian is a generic salutation used with the informal register (dare del tu), and is used indifferently both when meeting (like hello) and when parting (like bye). Given the context of the song I would choose to translate it to goodbye, but both meanings are possible.