On-chain data shows that the Bitcoin Puell Multiple has reached quite high levels recently. Here’s what this could mean for the current rally.
Bitcoin Puell Multiple has surged to high levels in recent days
As noted by an analyst in a CryptoQuant afterthe Puell Multiple is currently at even higher levels than those during the bull run peak of 2021. The “Puell Multiple” is an indicator that measures the ratio of Bitcoin miners’ daily earnings to its 365-day average value.
The mining income here is calculated by multiplying the spot price by the total number of coins the miners spend each day (i.e. receive their block rewards).
This statistic tries to judge whether the current price of the cryptocurrency is fair or not by comparing the miners’ current earnings to the annual average.
When this statistic has a value greater than 1, it means that the miners are currently generating higher revenue than the average of the past year. It could be argued that the value of the asset is too expensive in times when the miners get more motivation to sell as they earn more profit.
On the other hand, values of the indicator below 1 imply that these chain validators are currently earning less than the norm. The lower the value of the indicator goes, the more difficulty the miners may have in supporting their activities. Thus, it can be assumed that the coin is undervalued under such circumstances.
Here is a chart showing the trend in the Bitcoin Puell Multiple over the past few years:
The value of the metric seems to have been quite high in recent days | Source: CryptoQuant
Historically, major bottoms in the cryptocurrency’s price have formed when the Puell Multiple has fallen below 0.5. Below this value, miners’ daily earnings are less than 50% of the annual average, which means that this cohort within this zone is under great pressure.
Tops weren’t that easy, though; the value at which they occur seems to have declined with each Bitcoin bull run. But in general, they have naturally occurred at values significantly above 1 (that is, during periods when the miners are bringing in large amounts of revenue).
Over the last few months, the Puell Multiple has once again been above the 1 level, and recently it has seen a further rise to a value of 2. Interestingly, this value is even higher than what was observed during the November 2021 all-in. time high price, but not near the levels of the top of the first half of 2021.
The metric’s current levels are also only slightly lower than what the April 2019 rally, a rally very similar to the current one, saw during its apex.
It is clear that it is difficult to say anything about the top based on these observations alone, as the tops have historically not followed a set pattern of the indicator, unlike the bottoms. However, current values still imply that the price has overheated quite a bit lately, which could mean that even if a top is not yet in, it could still be close.
BTC price
At the time of writing, Bitcoin is trading around $27,300, down 2% over the past week.
BTC has surged during the past day | Source: BTCUSD on TradingView
Featured image from iStock.com, charts from TradingView.com, CryptoQuant.com