On-chain data shows that the annual rate of change in the Bitcoin Puell Multiple has moved out of the bear market zone, a sign that a bull rally may be underway.
Bitcoin Puell Multiple 365-day rate of change has skyrocketed
As noted by an analyst in a CryptoQuant after, this could be one of the first indications of the return of the bull market. The “Pull Multipleis an indicator that measures the ratio of daily Bitcoin mining earnings (in USD) to its 365-day moving average (MA).
When the value of this metric is greater than 1, miners currently earn more than the annual average. On the other hand, values below the threshold imply that the earnings of these chain validators are lower than normal.
As miners’ earnings shift, these holders will be more or less likely to sell BTC (depending on the direction of the break-even mark into which the ratio has changed), which is a factor that can affect the price of the crypto. So when the Puell Multiple is greater than 1, BTC can be considered overvalued, while a value lower than this value can suggest that the coin is undervalued.
The relevant indicator here is not the Puell Multiple itself, but the rate of change (RoC). The RoC represents the rate at which a metric changes value over a defined period of time.
In particular, the 365-day RoC of the Puell Multiple is of interest in the current discussion. Here is a chart showing the trend in this indicator over the different Bitcoin cycles:
Looks like the value of the metric has spiked in recent days | Source: CryptoQuant
In the chart above, the quant has highlighted the relevant zones for the Bitcoin Puell Multiple 365-day RoC. It appears that highs have occurred in the crypto price whenever the metric has touched the red line, while mid-cycle highs have been set around the orange line.
And it looks like bear markets lasted while the indicator was around the green line. It also seems that transitions in and out of bear markets have generally followed the dotted line historically.
Recently, while Bitcoin has surged, miner earnings have also skyrocketed, leading to the Puell Multiple also seeing a rise. As the chart shows, the indicator’s 365-day RoC has naturally seen a rapid rise over the past few days.
With this spike, the stat has finally crossed above the dotted line, which could mean, if the past pattern is anything to go by, that the bear market is coming to an end and that crypto may have begun to transition into a rising trend. However, the analyst notes that some price action is still needed before this breakout can be fully confirmed.
BTC price
At the time of writing, Bitcoin is trading around $22,800, up 9% over the past week.
The value of the crypto seems to have been moving sideways in the last few days | Source: BTCUSD on TradingView
Featured image by Dylan Leagh on Unsplash.com, charts from TradingView.com, CryptoQuant.com