Bitcoin’s difficulty-adjusted puell multiple has been below one recently, here’s why this may suggest that BTC miners are still under pressure.
Bitcoin’s difficulty-adjusted Puell multiple has yet to break 1
according to a investigator at on-chain analytics firm Glassnode, miners are still earning around 12% less than last year’s average. The indicator of interest here is the “puell multiple”, which measures the ratio of the Bitcoin miner’s daily revenue (in USD) to the 365-day moving average (MA) of the Bitcoin miner.
When the value of this metric is greater than one, it means that miners are currently earning more than their average for last year. During such periods, miners generally find mining profitable.
On the other hand, values below this threshold imply that miner income is below the annual average, possibly suggesting that this cohort may be under pressure.
However, there is a problem with the multiple of puell, and that is that it only depends on the price of the cryptocurrency. The metric does not take into account another important factor for miners: mining difficulty.
Mining difficulty is a built-in feature of the Bitcoin blockchain that decides how difficult it would be for miners to mine blocks on the network. This concept exists because the BTC blockchain aims to keep the rate of block production (or more simply, the rate at which miners handle transactions) at a constant value.
When the network hashrate (a measure of the total computing power connected to the chain) increases, miners can generate block hashes faster. But since the chain doesn’t want this to happen, it increases the difficulty to slow down the miners enough to bring them back to the desired rate.
Due to the existence of the difficulty, the income of individual miners is reduced every time the hashrate increases. This is due to the fact that the block rewards are always the same (except during halving events, where they are halved), which means that if more miners connect to the network, individual shares of all involved become smaller.
The “Difficulty Adjusted Puell Multiple” is a modified version of the indicator that provides a more realistic representation of the miners’ situation, as it accounts for mining difficulty.
Here’s a chart showing the trend in this metric over the past few years:
The value of the metric seems to have been below one recently | Source: Glassnode on Twitter
As shown in the chart above, Bitcoin’s puell multiple crossed above the one mark at the start of the year, as the ongoing rally in the asset’s price began. This indicator currently has a value of 1.2, which suggests that miners as a whole are earning significantly more than the annual average.
However, the difficulty-adjusted version of the metric is still below one and has been throughout the bear market, even though the price has seen a significant rise recently.
At the current 0.88 level, miners are earning 12% less than the annual average, which implies that they may still be under some pressure right now, although not as severely as during bear market lows.
Bitcoin 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 by Brian Wangenheim on Unsplash.com, Charts from TradingView.com, Glassnode.com
