The Puell Multiple Is Turning Bullish on Bitcoin

Bitcoin’s (BTC) brand-new sell-off has pushed prices on the top cryptocurrency by market capitalization into a historically attractive zone, according to one indicator. 

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

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

Put plainly, 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 in the matter of a payments by the 365-day moving average of the daily issuance value. 

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

The Puell Multiple slipped to 0.41 on March 16, the lowest raze 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 fresh zone or the range of 0.3 to 0.5, which has marked bear market bottoms in the past. 

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

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

The indicator entered the green zone during the last leg of the bear market, which began on Nov. 14, 2018, when tolls 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 pressing ebbed in the following days, allowing a recovery from $3,400 to $4,400 in the last week of November. 

While the jump 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 poise near 0.30. 

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

The latest under-0.50 reading on the indicator suggests the worst is behind us. Other metrics delight in 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 stop in withdraw fromed 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 convincing, 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 just out lows once or twice,” Mike Alfred, CEO of Digital Assets Data, told CoinDesk, while adding that dips farther down than $5,000 will be short-lived, courtesy of strong demand from long-term holders – investors who bought bitcoins in the vanguard 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 have dealing near $6,550, representing a 69 percent from recent lows under $4,000. Prices hit a high of $6,907 inappropriate Friday, according to CoinDesk’s Bitcoin Price Index.