The Bitcoin Puell difficulty-adjusted multiple has been below one recently, so it could indicate that BTC miners are still under pressure.
Bitcoin Difficulty Adjusted Puell Multiple has yet to break above 1
According to a researcher at on-chain analytics firm Glassnode, miners are still earning around 12% less than the average over the past year. The indicator of interest here is the Puell Multiple, which measures the ratio between daily Bitcoin miner earnings (in USD) and the 365-day moving average (MA) of the same.
If the value of this metric is greater than one, it means that miners are currently earning more than their average over the past year. During such periods, miners generally find mining profitable.
On the other hand, readings below this threshold imply that miner earnings are below the annual average, possibly indicating that this cohort could be under pressure.
However, there is a problem with the Puell multiplier, and that is that it only depends on the price of the cryptocurrency. The metric does not take into account another important factor for miners: mining difficulty.
Mining Difficulty is a built-in feature of the Bitcoin blockchain that decides how difficult it is currently for miners to mine blocks on the network. This concept exists because the BTC blockchain aims to keep the block production rate (or more simply, the rate at which miners transact) at a constant value.
As the network hashrate (a measure of the total processing power connected to the chain) increases, miners can hash blocks faster. However, because the chain doesn’t want this, it increases the difficulty of slowing miners just enough to get them back up to speed.
Due to the existence of the difficulty, as the hashrate increases, revenue for individual miners shrinks. This is because block rewards always stay the same (except for halving events, where they are halved), which means that as more miners connect to the network, everyone’s individual stakes get smaller.
The “difficulty-adjusted Puell multiple” is a modified version of the indicator that represents the miners’ situation more realistically as it takes mining difficulty into account.
Here’s a chart showing the trend of this metric over the past few years:
The value of the metric seems to have been below one recently | Source: Glassnode on Twitter
As shown in the chart above, the Bitcoin Puell multiple crossed the one mark earlier in the year as the asset’s ongoing rally began. Currently, this indicator has a value of 1.2, which suggests that miners as a whole are earning significantly more than the annual average.
However, the difficulty-adjusted version of the metric is still below one and applied throughout the bear market, although the price has seen a significant increase recently.
At the current level of 0.88, miners are earning 12% less than the annual average, suggesting they are still under pressure at the moment, albeit not as much as during the bear market lows.
BTC price
At the time of writing, Bitcoin is trading around $30,400, up 9% over the past week.
Looks like BTC is up sharply | Source: BTCUSD on TradingView
Featured image by Brian Wangenheim at Unsplash.com, charts by TradingView.com, Glassnode.com
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