Bitcoin Puell Multiple Starts To Leave Bear Market Zone, Bull Rally Here?

On-chain data shows the annual rate of change in the Bitcoin Puell Multiple has exited the bear market zone, a sign that a bull rally may be here.

As pointed out by an analyst in a CryptoQuant post, this could be one of the first indications of the return of the bull market. The “Puell Multiple” is an indicator that measures the ratio between the daily Bitcoin mining revenue (in USD) and the 365-day moving average (MA) of the same.

When the value of this metric is greater than 1, miners are making more income than the yearly average right now. On the other hand, values below the threshold imply the revenues of these chain validators is less than usual.

As miner revenues shift, these holders become more or less likely to sell BTC (depending on which way of the break-even mark the ratio has swung in), which is a factor that can affect the price of the crypto. Thus, when the Puell Multiple is greater than 1, BTC may be considered overvalued, while being lesser than this value might suggest the coin is undervalued.

The relevant indicator here is not the Puell Multiple itself but its rate of change (RoC). The RoC displays the speed at which any metric changes its value over a defined period.

In particular, the 365-day RoC of the Puell Multiple is of interest in the current discussion. Here is a chart that shows the trend in this indicator over the course of the different Bitcoin cycles:

In the above graph, the quant has marked the relevant zones for the Bitcoin Puell Multiple 365-day RoC. It seems like tops have taken place in the crypto price whenever the metric has touched the red line, while mid-cycle highs have been set around the orange line.

And it would appear that bear markets have lasted while the indicator has been around the green line. It also looks like transitions to and from bear markets have generally followed the dotted line historically.

Recently, as Bitcoin has sharply rallied, miner revenues have also shot up, leading to the Puell Multiple also observing a rise. As the chart displays, the 365-day RoC of the indicator has naturally seen some rapid rise in recent days.

With this spike, the metric has finally crossed above the dotted line, which could mean, if the past pattern is anything to go by, that the bear market may be coming to an end, and the crypto might have started transitioning towards a bullish trend. The analyst notes, however, that it will still take some more price action before this breakout can be fully confirmed.

At the time of writing, Bitcoin is trading around $22,800, up 9% in the last week.