On-chain data shows the Bitcoin Puell Multiple is currently forming a pattern that has previously signaled a bullish opportunity for the asset.
Bitcoin Puell Multiple Has Plunged To Low Levels Recently
As pointed out by an analyst in a CryptoQuant Quicktake post, BTC may be showing an opportunity that only comes once in a given bull cycle. The on-chain indicator of interest here is the “Puell Multiple,” which keeps track of the ratio between the Bitcoin miner revenue and the 365-day MA of the same.
The miners earn their income through two sources, block reward and transaction fee, but in the context of the Puell Multiple, only the block reward, which happens to make up for the majority of the mining revenue, is relevant.
The block reward here naturally refers to the BTC compensation that miners receive for solving blocks on the network. A key feature of the Bitcoin blockchain is that these rewards are given out at more or less a fixed rate. Also, the scale of them remains constant, bar one exception, which will be mentioned shortly.
When the value of the Puell Multiple is greater than 1, it means the miners are earning more than the average for the past year right now. The higher the metric gets above this mark, the more motivation these chain validators have for selling, and thus, the more the coin could be considered overvalued.
On the other hand, the indicator being below this mark implies the miners are currently making less than usual, which could be a potential sign that mining is becoming unprofitable.
Now, here is a chart that shows the trend in the Bitcoin Puell Multiple over the past decade:
The value of the metric appears to have been plunging in recent weeks | Source: CryptoQuant
As displayed in the above graph, the Bitcoin Puell Multiple had been above the 2 mark earlier in the year, implying miners were enjoying significantly higher revenues than average.
The reason behind this income boost was the rally in the asset’s price. The USD price is the only variable attached to the block rewards, so their value naturally rises when the price witnesses a surge.
From the chart, it’s visible that the indicator has seen a notable drop during the past couple of months, which has taken its value down to 0.7. This would suggest that miners are now in distress.
The recent bearish momentum in the price is a factor, of course, but the majority of the plummet finds its roots in one event: the fourth Halving. As mentioned earlier, there is one exception where block rewards change in BTC value, and the Halving event is that.
These events, which take place every four years, permanently cut the block rewards in half and the latest such event, the fourth in the cryptocurrency’s history, occurred back on April 20th.
In the chart, the quant has marked the instances where the Puell Multiple has shown this trend in the middle of previous bull cycles. It would appear that each of these crashes in miner revenue was followed by sharp surges in the asset’s price.
Based on this pattern, the analyst believes it’s likely that Bitcoin would end up seeing the start of a bull rally within this third quarter of 2024.
BTC Price
Bitcoin has been trying to start a recovery surge out of its recent lows, but so far, the asset hasn’t been able to find too much success as it has only recovered to $57,300.
Looks like the price of the coin has overall been moving sideways recently | Source: BTCUSD on TradingView