Bitcoin Puell Multiple Dips into "Undervalued" Territory for the First Time in Over a Year

As an analyst in a CryptoQuant Quicktake post pointed out, the BTC Puell Multiple has fallen recently.

A new analysis of on-chain data shows that the Bitcoin Puell Multiple has dipped into the “undervalued” territory for the first time in more than a year. This metric tracks the ratio between Bitcoin miners’ daily revenue and the 365-day moving average (MA) to gauge whether the coin is over or undervalued.

The analysis, published by an analyst in a CryptoQuant Quicktake post, reveals that the Puell Multiple has observed a steep plunge recently. This indicator is used to track the ratio between Bitcoin miners’ daily revenue and the 365-day moving average (MA) to assess whether the coin is over or undervalued.

Miners generate income through two channels: block rewards and transaction fees. While the former is compensation for adding a block to the network, the latter is a payment for each individual transaction included in the block.

However, only the block reward is included in the miners’ revenue for the calculation of the Puell Multiple. Since the block rewards are nearly always constant in terms of BTC value, the only variable left is the USD value of the rewards.

Hence, the indicator effectively measures revenue in USD, and a connection can be observed between the cryptocurrency’s price (which dictates the block reward's value) and the Puell Multiple.

When the metric is greater than 1, it indicates that miners have earned more than the average for the past year, and the price of the asset may be considered overvalued.

Conversely, if the indicator is lower than this threshold, it suggests that miners are currently making less than usual, and the coin may be considered undervalued.

Now, let's take a look at a chart that showcases the trend in the 7-day MA Bitcoin Puell Multiple over the past few years.

7-day MA of the Bitcoin Puell Multiple, Source: CryptoQuant

The graph above shows that the 7-day MA of the Bitcoin Puell Multiple was at a higher range earlier as the rally toward the new all-time high took place.

However, the indicator's value has observed a sharp drop recently. But during this same period, the cryptocurrency's price has been consolidating sideways.

So, if the price hasn't dropped, what could be impacting miner revenues? As mentioned earlier, the block rewards are nearly always constant, except during the Halving event, which occurs approximately every four years.

During this event, the asset's block rewards are permanently slashed in half. The latest Halving event occurred last month, which is why the Puell Multiple has registered such a steep drawdown.

With this drop, the indicator's 7-day MA has fallen below 1. According to the quant, “Investors may interpret the fall in the Puell Multiple as a sign that the market is adjusting to a new phase of scarcity, potentially preparing for a rally.”

Bitcoin's price is currently around $67,800, showing a 5% gain over the past week.