As a researcher with experience in analyzing Bitcoin and on-chain data, I find the current trend of the Puell Multiple to be an interesting development for potential investors in the crypto market. The recent plunge in this indicator, which has taken its value down to 0.7, suggests that miners are currently facing distress due to lower revenues.
The current pattern of Bitcoin‘s on-chain data, specifically the Puell Multiple, bears a resemblance to historical trends indicative of potential buying opportunities for the cryptocurrency.
Bitcoin Puell Multiple Has Plunged To Low Levels Recently
An analyst in a recent CryptoQuant Quicktake post highlighted that Bitcoin could be presenting a rare opportunity during this bull market. The relevant on-chain metric to observe is the “Puell Multiple.” This indicator calculates the ratio between Bitcoin miners’ revenue and the moving average of the same revenue over the past 365 days.
When it comes to the Puell Multiple, the income of miners derives from two primary sources: block rewards and transaction fees. However, exclusively the block rewards, which represent the larger portion of mining earnings, are significant in this context.
In simple terms, the term “block reward” signifies the amount of Bitcoin that miners obtain as compensation for successfully mining and adding new blocks to the Bitcoin network. A distinctive characteristic of the Bitcoin blockchain is that these rewards are dispensed at a consistent rate with minimal variation. However, there’s an important exception to this rule, which will be discussed later.
When the Puell Multiple exceeds 1, it signifies that miners are currently making more than the typical earnings from the previous year. The higher this ratio rises above 1, the greater incentive miners have to sell, potentially indicating that the coin may be overvalued.
If the marker is below what’s indicated, it means miners are earning less than typical at present. This might be a warning sign that mining activities are no longer profitable.
Now, here is a chart that shows the trend in the Bitcoin Puell Multiple over the past decade:
Based on the graph I’ve examined, the Bitcoin Puell Multiple surpassed the 2-mark threshold earlier this year, indicating that miners experienced notably higher earnings compared to historical averages.
As an analyst, I’ve discovered that the primary cause of my recent income increase is the price surge of the specific asset. Since the US dollar value is directly linked to the block rewards, it follows logically that the reward value automatically rises whenever the price experiences a notable uptick.
As a researcher studying the data presented in the chart, I’ve noticed an intriguing development: The indicator has experienced a significant decrease over the last few months, dropping as low as 0.7. This observation implies that mining activities may be facing considerable challenges.
As a crypto investor, I’ve noticed the recent downturn in prices, but it’s essential to acknowledge that most of this decline can be attributed to one specific cause: the fourth Bitcoin Halving. Previously, I mentioned that there’s an exception when the block rewards change in Bitcoin’s value, and the Halving event is precisely that.
Every four years, these events occur, reducing the block rewards by half. The most recent instance of this happening, marking the fourth time in the cryptocurrency’s history, transpired on April 20th.
The chart indicates that the analyst has highlighted occasions where the Puell Multiple exhibited a similar pattern during past bull markets. It seems that every decline in mining revenue preceded significant price increases for the asset.
According to this trend, it’s reasonable to anticipate that Bitcoin will initiate a new bull market during the third quarter of 2024.
BTC Price
Bitcoin has made efforts to bounce back from its latest slump, yet it has not achieved significant progress thus far, with the cryptocurrency reaching a height of $57,300 once more.
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2024-07-09 22:11