Bitcoin miners are still under pressure, here’s why

Bitcoin difficulty adjusted puell multiple has been below one recently, here’s why this may indicate BTC miners are still under pressure.

The Bitcoin difficulty-adjusted Puell multiple has yet to be broken above 1

According to a scientist at the chain analysis company Glassnode, miners still earn around 12% less than the average in the last year. The indicator of interest here is the “puell multiple”, which measures the ratio of the daily Bitcoin mining revenue (in USD) to the 365-day moving average (MA) of the same.

When the value of this metric is greater than one, it means that the miners are earning more than the average for the last year. During such periods, miners generally find that mining is profitable.

On the other hand, values ​​below this threshold mean that miner earnings are below the annual average, possibly suggesting that this group may be under pressure.

However, there is a problem with the puell multiple, and that is that it only depends on the price of the cryptocurrency. The calculation does not take into account another important factor for the miners: the mining difficulty.

The mining difficulty is a built-in feature of the Bitcoin blockchain that determines how difficult miners will currently find it 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 process transactions) at a constant value.

As the network’s hashrate (a measure of the total computing power connected to the chain) increases, miners can hash blocks faster. But since the chain doesn’t want this to happen, it increases the difficulty of slowing down the miners just enough to get them back to the desired pace.

Because of the difficulty’s existence, income for individual miners shrinks every time the hashrate goes up. This is due to the fact that the block rewards always remain the same (except during halving events, where they are halved), which means that if more miners join the network, the individual shares of everyone involved become smaller.

The “difficulty adjusted puell multiple” is a modified version of the indicator that gives a more realistic representation of the situation of the miners, as it accounts for the mining difficulty.

Here is a chart showing the trend in this calculation over the last few years:

The value of the metric seems to have been below one recently | Source: Glassnode on Twitter

As shown in the graph above, the Bitcoin puell multiple crossed the one mark earlier in the year as the ongoing rally in the asset’s price began. Currently, this indicator has a value of 1.2, which suggests that miners as a whole earn significantly more than the annual average.

However, the difficulty-adjusted version of the metric is still below one and has been for the entire bear market, despite the price recently seeing a significant increase.

At the current level of 0.88, miners are earning 12% less than the annual average, which suggests that they may still be under some pressure right now, although not as severe as during the bear market lows.

BTC price

At the time of writing, Bitcoin is trading around $30,400, up 9% in the past week.

Looks like BTC has sharply surged | Source: BTCUSD on TradingView

Featured image from Brian Wangenheim at Unsplash.com, Charts from TradingView.com, Glassnode.com