For the fifth time in Bitcoin history, the Puell Multiple just flashed a buy signal, but the indicator’s developer issues a warning that the hash rate declined and China’s miner purge should be taken into account.
On Monday, the price of Bitcoin temporarily surged above $35,500, reviving hopes that the bull trend will soon continue. This put the cryptocurrency market in a cautiously optimistic mood.
Given the upward trend, some experts have cautioned that the lack of a daily close over the $35,000 barrier level is an indication that traders are merely closing positions at each breakout to resistance, suggesting that further losses may be ahead.
David Puell, an on-chain analyst and the inventor of the Puell Multiple, claims that the indicator has just provided its fifth buy signal in the history of Bitcoin.
The Puell Multiple examines market cycles from the standpoint of mining revenue and focuses on the supply side of the bitcoin economy, particularly Bitcoin miners and their earnings.
It is determined by dividing the daily BTC issuance value (in US dollars) by the daily issuance value’s 365-day moving average.
The price of Bitcoin fell below $4,000 during the crypto winter in mid-2018, and again in March 2020 when prices fell as a result of the COVID-19 epidemic, both times the Puell Multiple signaled as favorable purchasing opportunities.
When the price of BTC peaked at the peak of that cycle in late 2017 and during the 2013 Bitcoin bull market, it also gave traders a sell signal.
Miner Purge Results in Low Miner Difficulty
The crackdown on mining in China, which led to multiple sizable mining farms closing and moving to other nations, has made the recent challenges for Bitcoin worse. Analysts now anticipate the biggest decrease in mining difficulty ever as hash rates fall precipitously from all-time highs.
Although miners are typically seen as being forced to sell due to the fixed costs associated with running a mining operation, recent selling behavior has been accompanied by a 50% price decline, which means twice as much BTC needs to be sold to cover the same costs in fiat as well as increased expenses incurred by miners shifting their operations out of China.
The fact that big hash rate drops in the past have frequently been followed by price pullbacks may be a concern for cautious traders, making them reluctant to invest money in the current market environment.
Even though the price of bitcoin increased a little on Monday, Puell issued a warning that traders should take into account a variety of elements and not rely solely on one indication when making judgments.
