Onchain Series Part III: The Puell Multiple; What Miners Are Telling Us

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So far in this series we have looked at valuation through the MVRV Z-Score and market sentiment through NUPL. Today we turn to miner behaviour, and specifically a metric called the Puell Multiple.

To understand why miners matter, it helps to understand their position in the market. Miners are often referred to as compulsory sellers. Unlike most Bitcoin holders who can choose when to sell, miners operate with fixed costs: energy, hardware, staff. Those bills do not stop when the price drops. As a result, miners must sell a portion of their Bitcoin consistently to cover expenses, which means their revenue relative to historical norms has a direct influence on market dynamics.

The Puell Multiple measures this by dividing the daily USD value of newly issued Bitcoin by the 365-day moving average of that same figure. The result is a ratio that tells you whether miners are currently generating revenue that is unusually high or unusually low relative to the past year.

When the multiple is high, miner revenue is elevated well above the annual average. Historically that has coincided with Bitcoin price peaks, the periods where the market is overheated and supply pressure from miners is at its greatest. When the multiple is deep in the green zone, miner revenue has collapsed relative to the historical norm. Miners are operating under severe stress, many are running at a loss, and the weakest are being forced to shut down entirely. That environment has, in every prior cycle, marked the conditions from which Bitcoin has launched its next major recovery.

Source:https://www.bitcoinmagazinepro.com/charts/puell-multiple/

Where does the Puell Multiple sit today?

The indicator is in or approaching the green zone, consistent with the kind of miner stress that has historically preceded cycle bottoms. This is not a coincidence. When miners capitulate, forced selling intensifies temporarily before the weakest operations drop off and supply pressure eases. What follows that clearing process has historically been a significant repricing to the upside.

Three metrics in now and the picture they are painting together is consistent. Valuation is stretched to the downside, sentiment is deteriorating, and miners are under pressure. These are not the conditions of a healthy bull market. They are the conditions of a market approaching its floor. The final piece of this series will look at long-term holder behaviour through Reserve Risk, which will complete the case.

Stormrake Spotlight: Pax Gold (PAXG) ($4,061)

Source:https://www.tradingview.com/x/hg8hwh3H/

PAXG is hovering just above the key zone. When markets resume this week we can expect the bears to retest that level and look to push below it.

BTC/USD Key Levels and Price Action:

Source: https://www.tradingview.com/x/Sf1aafov/

Bitcoin was relatively flat over the weekend, battling the key level at $60,100 before the bears ultimately came out on top. Momentum has shifted back to the downside and Bitcoin now looks to create a new lower low, with the key support at $57,700 the likely target this week.

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*All prices are denominated in USD unless stated otherwise*

Written by Alexandar Artis

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