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On-chain data shows that the Bitcoin Puell Multiple has reached quite high levels recently. Here’s what that could mean for the current rally.
Bitcoin Puell Multiple Rises To High Levels In Recent Days
As an analyst noted in a CryptoQuant post, the Puell Multiple is currently at an even higher level than what it saw during the 2021 bull run. The Puell Multiple is an indicator that measures the ratio between the daily income of Bitcoin miners and its 365-day average.
The mining income here is calculated by multiplying the spot price by the total number of coins that miners mint (i.e. receive block rewards) each day.
This indicator tries to judge whether the current price of a cryptocurrency is fair or not by comparing the current income of miners with the annual average.
When this indicator is higher than 1, it means that now miners receive higher income than the average for last year. It can be said that the value of the asset is overestimated during such periods when miners have more motives to sell, the more profit they make.
On the other hand, indicator values below 1 mean that these chain validators are currently earning less than the norm. The lower the value of the indicator, the more problems miners may have in supporting their activities. Thus, under such conditions, it can be assumed that the coin is undervalued.
And now here is a chart showing the trend of the Puell Bitcoin multiple over the past few years:
The value of the metric seems to have been quite high in recent days | Source: CryptoQuant
Historically, major cryptocurrency price lows have been formed whenever the Puell Multiple falls below the 0.5 mark. Below this value, the daily income of miners is less than 50% of the annual average, which means that this cohort is under strong pressure inside this zone.
However, the tops weren’t that simple; the value at which they occur seems to decrease with each Bitcoin bull run. But in general, they naturally arose at values significantly higher than 1 (that is, during periods when miners rake in large amounts of income).
Over the past few months, the Puell Multiplier has been above the 1 level again, and recently it has seen a further jump towards a value of 2. Interestingly, this value is even higher than what was observed in November 2021. time high price, but not close to the levels of the top of the first half of 2021.
The current levels of the indicator are also only slightly smaller than the April 2019 rally, which has much in common with the current one seen during its peak.
Obviously, it’s hard to say anything about a top based on these observations alone, since tops have not historically followed any established indicator pattern, but bottoms have. However, the current readings still likely imply that the price has overheated a lot lately, which could mean that even if the top hasn’t formed yet, it could still be close.
At the time of writing, Bitcoin is trading around $27,300, down 2% over the past week.
BTC has risen over the last day | Source: BTCUSD on TradingView