What is the Puell Multiple in the crypto world and how is it used?
The tool was developed by analysts David Puell in 2019 and shows whether the current profitability of the mining indicates that Bitcoin is overrated, undervalued or rated fairly.
In contrast to classic price-related indicators, the Puell Multiple focuses on the offer page of the Bitcoin economy. It shows when the miners are most likely to sell or keep new bitcoins – and thus provide valuable information on assessing the correct investment point.
Bitcoin miner play a crucial role in the network's ecosystem. You secure the blockchain and receive newly produced bitcoins as a reward for your work. About every 10 minutes, Miner Bitcoin earn through block rewards and through transaction fees of users who send Bitcoin.
These miners face a special challenge: they have high ongoing operating costs, including electricity, hardware and infrastructure. In contrast to normal investors who can keep Bitcoin theoretically unlimited, miners often have to sell part of their rewards to cover these ongoing expenses.
This leads to what analysts call “sales pressure” in the market. When Miner makes high profits, tend to keep more Bitcoin. However, if you are financially under pressure, you are forced to sell more – which can potentially push the price down. However, it is important to understand that Miner does not control the price of Bitcoin – their profitability largely depends on the market conditions, not the other way around.
Understanding the Puell Multiple becomes easier if you know the decisive threshold values. Values over 3.5 have historically correlated with potential market tips because they indicate that the miners' income is exceptionally high compared to the annual average. When the indicator reaches values between 3.5 and 10, it enters the so-called “red zone”-an area that often coincides with Bitcoin price tips, whereby it should be noted that correlation does not mean causality.
Conversely, values below 0.5 historically indicate possible market low. The “green zone”, typically in the range from 0.3 to 0.5, signals that the revenue of the miners is unusually low compared to the annual average. In such phases, miners are under considerable financial pressure, which often leads to increased sales pressure – precisely when prices are already low. Such conditions have often led to relaxation in the past as soon as the sales pressure decreased.
The middle range between 0.5 and 3.5 stands for normal market conditions. In these phases, Bitcoin usually moves within established price zones without extreme rashes in one direction.
A notice: These threshold values are based on historical observations of past market cycles and are not a guarantee of future price developments.
The effects of halving events
Bitcoin generals create special dynamics in the Puell Multiple that investors should understand. The block reward for Miner is halved about every four years. This immediately reduces the income of the miners by 50 % and leads to a significant decline in the Puell Multiple.
Such declines triggered by Halvings press the Puell Multiple in the area that is historically considered to be “undervalued”. However, this does not automatically mean that Bitcoin is cheap. Rather, it represents a re-evaluation of the mining economy, which must first be processed by the market. The latest Halving took place in April 2024 and, as expected, led to a sharp decline in the indicator.
Historically, the Bitcoin price after Halvings has increased again to restore the profitability of the mining-however, this process can take months or even years. It is also important: The Bitcoin price sometimes falls after a halving before it recovered again because the market first has to adapt to the new offers of offer. This makes the time particularly complex for investors after a halving, who use the Puell Multiple as an analysis tool.
Private investors can use the Puell Multiple as part of their market analysis strategy. In the past, extremely high values were often preceded by phases in which it proved to be beneficial to take profits with them or to reduce positions. Such high values indicate that Miners are exceptionally profitable – even if this does not guarantee immediate price declines.
Likewise, extremely low values were preceded by historically favorable purchase opportunities. Such phases usually stand for maximum fear on the market – even miners then have financial difficulties. Even if it is impossible to hit precise low points, there were often significant courses in the past.
It is most effective to pay attention to persistent movements instead of one -day outliers. Markets can be in extreme conditions longer than expected – patience and good risk management therefore remain crucial.
The Puell Multiple is best suited for medium to long-term cycle analysis, not for short-term trading signals.
Restrictions and considerations
The Puell Multiple is not a perfect indicator and should never be considered isolated. Market conditions can quickly change through regulatory news, macroeconomic developments or unforeseen events that overlap the mining economy. The indicator works best in combination with other analysis tools and fundamental analysis.
Modern miners also have much more sophisticated treasury strategies than in the early days of Bitcoin. Some large mining companies hold considerable Bitcoin reserves, which can reduce direct sales pressure even in less profitable times. These changes in the behavior of the miners could influence how strongly the Puell multiple correlates with price development.
How successful traders use this indicator
The technical analysis also effectively complements the PUELL multiple. Supporting and resistance levels, trend lines and momentum indicators can help to be better and exits- based on the level indicated by the mining economy. This multi-indicator approach helps to reduce incorrect signals and improve the quality of the decisions.
