Bitcoin Puell Multiple At Crucial Juncture: Will Retest Save Rally?

On-chain data shows the Bitcoin Puell Multiple indicator is currently retesting a crucial level that may end up deciding the fate of the latest rally.

As explained by an analyst in a CryptoQuant Quicktake post, the interaction of the Puell Multiple with its 365-day moving average (MA) can indicate trends in the market.

The “Puell Multiple” refers to an indicator that keeps track of the ratio between the daily revenue of the Bitcoin miners (in USD) and the 365-day MA of the same. The mining revenue here is simply the total amount of coins issued by the network inside a 24-hour span multiplied by the spot price of the coin.

When the value of the Puell Multiple is greater than 1, it means that the miners are currently making a higher income than the average value for the past year. Naturally, when this happens, the motive to sell would rise for these chain validators and thus, the BTC price may be considered overvalued.

On the other hand, values under the mark suggest the cryptocurrency’s price may be becoming undervalued as the miners are now making lower revenues than the 365-day average.

Now, here is a chart that shows the trend in the Bitcoin Puell Multiple, as well as its 365-day MA, over the history of the asset:

As displayed in the above graph, the Bitcoin Puell Multiple had naturally spiked to high levels just earlier when the asset’s price had observed its rally, which had naturally resulted in the block rewards of the miners also shooting up.

As the price of the asset has struggled recently, though, the indicator’s value has come back down and is now retesting its 365-day MA. This line has been relevant historically for the metric, as the quant highlighted in the chart.

Generally, a break above the line has proven to be bullish for the cryptocurrency, while a move under can imply a transition towards a bearish trend. As such, Bitcoin might be standing at a crucial juncture right now, at least from the perspective of this indicator.

Last year, the Puell Multiple also witnessed a similar retest at its 365-day MA, as is apparent in the graph. Back then, the metric had ended up finding support at this important line, and the resulting bounce was what led towards the latest rally in the asset.

It now remains to be seen whether the 365-day MA would act as support this time as well or if the indicator would go through a breakdown. In the latter scenario, the Bitcoin price could end up observing a deeper correction.

Bitcoin’s struggle has continued recently as its price has come down to just $40,800.