BTC On-Chain Analysis: Puell Multiple Confirms Bitcoin Has Hit Macro Bottom
Today’s chain analysis highlights the famous Puell Multiple indicator, which has broken out of the oversold area in recent days. Historically, the move was a signal confirming that Bitcoin’s macro bottom had been reached.
Hitting a bottom in Bitcoin’s price does not necessarily mean the immediate start of an uptrend. Looking at the behavior of the Puell Multiple after leaving the oversold area, we see that each time the indicator had to test and validate the area of the breakout. For the BTC price, this meant roughly a 3-month accumulation.
What is Puell Multiple?
Puell Multiple was created by analyst David Puell. It is one of the indicators of the health of Bitcoin miners. It expresses the ratio of the daily value of the Bitcoin issue (in USD) to the 365-day moving average of the daily value of the issue. This simple ratio provides an elegant tool for assessing market cycles from the miners’ profitability.
In a chain analysis last month, BeInCrypto noted that the Puell Multiple has reached an oversold level that has historically corresponded to the macro lows of bear markets (green circles). This range is within the green range of 0.3-0.5.
In contrast, the upper red range of 4-10 was reached during the historical tops of bull markets (red circles). In the chart below, we use the 14-day Puell Multiple average to reduce the noise and look at the long-term trend.
Current measurements and comparison with the COVID-19 crash
Looking at the current readings, we see that the Puell Multiple has just broken out of the green oversold area (blue arrow). Of course, the breakout from the oversold area was made possible by the increase in BTC price, which today is about 36% above the June 18 bottom of $17,622.
It is interesting to compare the current movement of the Puell Multiple with the previous situation when the indicator left the green area. This happened during the March-June 2020 COVID-19 crash, when Bitcoin hit a macro bottom of $3782 (red circle).
However, the Puell Multiple did not fall into oversold territory until a few weeks later (green circle). By then, Bitcoin was already in the middle of a V-shaped recovery, rising by about 150% and causing the indicator to break out of the green oversold area. We see a similar pattern today.
Waiting for another test
Looking again at the long-term chart of the Puell Multiple, we see some correlation between a breakout from the green area and the price of BTC. First of all, every time after a breakout, the indicator seems to come back to confirm the oversold area (blue rectangle). It doesn’t always do it exactly and touch the green area, but the corrective movement after the initial upward phase is evident.
So, after confirming the oversold area as support, the Puell Multiple continues its upward movement. Interestingly, the increase of the indicator in the first weeks is not correlated with the increase in BTC price. During this period, Bitcoin always undergoes an accumulation phase of about 3 months, which begins a few weeks after the macro bottom is generated (yellow rectangle).
If a similar situation were to repeat itself now, the start of an uptrend for BTC could be started around October-November 2022. In addition, it would be worth waiting for the aforementioned retest of the Puell Multiple indicator, which must hold above the green oversold area. A clear consolidation of the indicator and the BTC price will be strong indications for the thesis that BTC reached a macro bottom in June.
For Be[in]Crypto’s Latest Bitcoin (BTC) Analysis, click here.
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