What is the Puell Multiple?

The Bitcoin market can often feel overwhelming with its price fluctuations and volatility.

However, certain tools can provide insights into Bitcoin’s economic cycles, helping users make sense of the broader picture.

One such tool is the Puell Multiple, a Bitcoin-specific metric that sheds light on miner revenue trends.

What is the Puell Multiple?

The Puell Multiple is a measure that compares Bitcoin miners’ daily revenue to its historical average.

This comparison offers a snapshot of Bitcoin mining’s financial health and how it may relate to Bitcoin’s price movement over time.

Here’s how it’s calculated:

  1. Take the daily value of new Bitcoins mined.
  2. Divide it by the 365-day average of that value.

This simple formula provides valuable insight.

For example, if miners earn $10 million today and the average over the past year is $5 million, the Puell Multiple would be 2.0.

What Do the Numbers Indicate?

The Puell Multiple typically ranges between 0.5 and 4.0.

When it moves outside of this range, it can signal key market conditions:

  • Above 4.0: Historically, this has been associated with potential market peaks. When miners are earning significantly more than usual, it could indicate increased selling pressure from miners.
  • Below 0.5: On the other hand, this suggests miner revenue is lower than usual, potentially indicating a market bottom where Bitcoin may be undervalued.
  • Between 0.5 and 4.0: This range is generally seen as standard market behavior.

For example, during Bitcoin’s run-up to nearly $20,000 in December 2017, the Puell Multiple exceeded 7.0, aligning with the market peak before a subsequent price decline.

How Can the Puell Multiple Be Used?

While the Puell Multiple can offer insights into Bitcoin’s mining economics, it’s best used as part of a broader toolkit.

Here are a few points to consider:

  • Low values (below 0.5) may suggest miner stress, potentially signaling an undervalued market.
  • High values (above 4.0) could indicate a period of elevated miner profitability, which historically has been followed by price corrections.
  • Complementary Tools: The Puell Multiple is most effective when used alongside other indicators, such as the Stock-to-Flow model or on-chain metrics.
  • Trend Analysis: Look at long-term trends rather than focusing on a single data point, as market conditions can change rapidly.

Conclusion

The Puell Multiple is a useful indicator for understanding the revenue patterns of Bitcoin miners and how these patterns relate to broader market cycles.

By incorporating this tool into your analysis, you can gain deeper insights into Bitcoin’s historical behavior.

However, no single metric should be relied on in isolation, and it’s always important to consider a range of factors when assessing the market.

For those interested in exploring these metrics further, Bitbo’s advanced charts can help visualize the Puell Multiple alongside other key Bitcoin indicators.