The Puell Multiple Is Turning Bullish on Bitcoin

You might not have heard of the Puell Multiple but right now it appears to show bitcoin is undervalued.

AccessTimeIconMar 20, 2020 at 4:17 p.m. UTC
Updated Sep 14, 2021 at 8:21 a.m. UTC
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Bitcoin’s (BTC) recent sell-off has pushed prices on the top cryptocurrency by market capitalization into a historically attractive zone, according to one indicator. 

Prices fell from $10,200 in mid-February to 12-month lows below $4,000 last week, dashing many hopes for a strong rally ahead of the May 2020 mining reward halving. 

However, with the price slide, a key indicator called the “Puell Multiple” has declined to levels suggesting the value of newly issued bitcoins on a daily basis is quite low compared to historical standards.

Put simply, this signals appears to show the cryptocurrency is now undervalued. 

The Puell Multiple is calculated by dividing the daily issuance value of bitcoins in U.S. dollar terms by the 365-day moving average of the daily issuance value. 

Daily issuance refers to new coins added to the ecosystem by miners, who receive coins as rewards for validating blocks on the blockchain. Miners usually cover mining costs by selling coins into the market.

Puell Multiple, Dec. 2019 to Mar. 2020
Puell Multiple, Dec. 2019 to Mar. 2020

The Puell Multiple slipped to 0.41 on March 16, the lowest level since Jan. 17, 2019 and was last seen at 0.47, according to data provided by the blockchain intelligence firm Glassnode.

The metric is now hovering in the green zone or the range of 0.3 to 0.5, which has marked bear market bottoms in the past. 

Historical data also shows the indicator enters the green zone in the last leg of the bear market following which the bearish momentum weakens. 

2018 bear market

Bitcoin’s bear market from the record high of $20,000 reached in December 2017 ended at lows near $3,200 in mid-December 2018, with the Puell Multiple hitting a low of 0.30.

Puell Multiple, 2018 bear market
Puell Multiple, 2018 bear market

The indicator entered the green zone during the last leg of the bear market, which began on Nov. 14, 2018, when prices fell below the long-held support of $6,000 and slipped to $4,000 by Nov. 20. 

On that day, the Puell Multiple fell below 0.5, signaling undervaluation. The selling pressure ebbed in the following days, allowing a recovery from $3,400 to $4,400 in the last week of November. 

While the bounce was short-lived, the sellers could not do much damage, as evidenced by prices bottoming out just $200 below November's low of $3,400 on Dec. 15. That’s when the Puell Multiple was hovering near 0.30. 

Puell Multiple 2011-2015
Puell Multiple 2011-2015

Going back more than half a decade, bitcoin’s downward move from the November 2013 high of $1,100 came to an end near $150 in January 2015. The Puell Multiple also bottomed out near 0.30 in mid-January. Similarly, the preceding bear market had ended in November 2011 with the indicator’s drop to 0.30.

Is the bear market over?

The latest under-0.50 reading on the indicator suggests the worst is behind us. Other metrics like the market value to realized value (MVRV) Z-score are also indicating undervaluation. 

However, the cryptocurrency might not be out of the woods yet, as the Puell Multiple hasn’t dropped to 0.30 – the level which has marked bear market lows in the past. 

If history is a guide, we may see one more bout of selling, which could likely push prices back to the $5,000-$4,000 range and the Puell Multiple down to 0.30. 

"We can certainly retest recent lows once or twice," Mike Alfred, CEO of Digital Assets Data, told CoinDesk, while adding that dips below $5,000 will be short-lived, courtesy of strong demand from long-term holders – investors who bought bitcoins before the massive rally from $6,000 to $20,000 seen in the fourth quarter of 2017 and during the last five weeks of 2018. 

Bitcoin is currently trading near $6,550, representing a 69 percent from recent lows under $4,000. Prices hit a high of $6,907 early Friday, according to CoinDesk’s Bitcoin Price Index


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