Puell Multiple Says Bitcoin Is Trading At A 'Discount' Now

On-chain data shows the Bitcoin Puell Multiple has dipped into the “undervalued” territory for the first time in more than a year.

Bitcoin Puell Multiple Has Observed A Plunge Recently

As an analyst in a CryptoQuant Quicktake post pointed out, the BTC Puell Multiple has fallen recently. The Puell Multiple refers to an on-chain indicator that tracks the ratio between Bitcoin miners’ daily revenue and the 365-day moving average (MA).

Miners earn their income through two means: block rewards and transaction fees. The former is what they receive as compensation for adding a block on the network, while the latter is a payment they get through all the individual transactions part of the block.

In the context of the Puell Multiple, though, only the block reward is included in the miners’ revenue. The block rewards almost always remain fixed in terms of BTC value, so the only variable related to them is the USD value of the rewards.

As such, the indicator measures revenue in USD. Thus, there is a connection between the cryptocurrency’s price (which guides the block reward’s value) and the Puell Multiple.

When the value of this metric is greater than 1, it means that the miners have earned more than the average for the past year. In such a condition, the price of the asset may be considered overvalued.

On the other hand, the indicator is lower than this threshold, suggesting that miners are currently making less than usual. Naturally, the coin may be considered undervalued when this happens.

Now, here is a chart that shows the trend in the 7-day MA Bitcoin Puell Multiple over the past few years:

The value of the metric appears to have taken a plunge in recent days | Source: CryptoQuant

The graph shows that the 7-day MA of the Bitcoin Puell Multiple was at relatively high levels earlier when the rally toward the new all-time high occurred.

Recently, though, the indicator’s value has plunged sharply. At the same time, however, cryptocurrency’s price has been consolidating sideways.

So, what has changed miner revenues if the price hasn’t dropped? As mentioned before, block rewards almost always remain constant. Almost. The one exception is 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 occurred last month, so the Puell Multiple has registered such a steep drop.

With this drawdown, the indicator’s 7-day MA is now below 1. “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,” says the quant.