As an experienced analyst, I believe that the recent dip of the Bitcoin Puell Multiple below 1 for the first time in over a year is an important development in the crypto market. This indicator measures the revenue of Bitcoin miners and compares it to the moving average from the past year. When the value is above 1, it suggests that miners have earned more than the average for the past year, potentially indicating an overvalued coin. Conversely, a value below 1 implies that miners are earning less than usual, which could suggest an undervalued coin.
As a researcher studying the Bitcoin market, I’ve noticed an intriguing development in the on-chain data: the Puell Multiple has dropped below the “undervalued” threshold for the first time in over a year.
Bitcoin Puell Multiple Has Observed A Plunge Recently
A crypto analyst in a recent CryptoQuant Quicktake observation noted that the Bitcoins Puell Multiple has taken a downturn. The Puell Multiple signifies an on-chain metric calculating the ratio between Bitcoin miners’ daily earnings and the preceding 365-day moving average (MA).
Miners generate income in two ways within the network: through block rewards and transaction fees. Block rewards represent the compensation they receive for successfully adding a new block to the blockchain. Transaction fees are the payments they gain by processing all the individual transactions included in a given block.
As a researcher studying the Puell Multiple, I’ve noticed that miners’ revenue solely derives from the block reward in this context. Notably, the value of these rewards in Bitcoin terms remains consistent. Consequently, the only factor subject to change is the USD value attached to these BTC rewards.
I, as an analyst, observe that the Puell Multiple is linked to the price of a cryptocurrency, specifically in terms of how it affects the US Dollar value of the block rewards. In simpler terms, the price of a cryptocurrency influences the value of the block rewards, which in turn impacts the Puell Multiple measurement.
If the metric’s value surpasses 1, it indicates that miners have made more than the typical earnings from the previous year. In this scenario, the asset’s price might be perceived as inflated.
As a researcher, I would interpret the data to mean that the indicator reading is below the established threshold. This implies that miners are presently earning lower returns than typical. Consequently, some market participants might view the coin as potentially underpriced in this scenario.
Here’s a chart illustrating the development of Bitcoin’s 7-day Moving Average Puell Multiple over the last several years.
The graph indicates that the 7-day moving average of the Bitcoin Puell Multiple was comparatively elevated during the previous rally leading up to the new record high.
Lately, I’ve noticed a significant decrease in the indicator’s reading, while cryptocurrency prices have been relatively stable and moving laterally in the market.
How does a change in miner revenues occur if the price remains stable? Previously discussed is the fact that block rewards typically stay consistent. However, there’s an exception to this rule: the Halving event, which takes place roughly every four years.
As an analyst, I’ve observed that during this specific event, the block rewards for the asset I’m analyzing have been reduced by half permanently. This latest occurrence took place about a month ago. Consequently, the Puell Multiple, a metric I closely monitor, has shown a significant decrease as a result.
According to the quant’s analysis, the recent decrease in the Puell Multiple has caused its 7-day moving average to drop below 1. This observation might be seen by investors as an indicator that the market is readjusting to reduced supply, possibly signaling an upcoming price increase.
BTC Price
At the time of writing, Bitcoin is trading at around $67,800, up 5% over the past week.
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2024-05-24 07:11