Bitcoin mining requires large investments that need to be repaid. However, problems may arise with this, since selling BTC is not always profitable. To determine when miners should get rid of bitcoins, the “Puell multiplier” was invented.

What is the Puwell multiplier?

The Puell Multiple is an indicator that shows the impact miners have on Bitcoin sales. Its calculation is extremely simple:

Puell Multiplier = daily value of BTC mined in dollars/365 day moving average of daily value of BTC mined in dollars.

But this formula was only initially. In the early days, fees on the Bitcoin network were negligible and did not play any significant role for miners. Now the situation has changed, so the calculation formula has been slightly adjusted:

Puell Multiplier = Daily BTC Mining Revenue in Dollars/365 Day Moving Average of Daily BTC Mining Revenue in Dollars.

Who is Puell

David Puell is a developer who presented his multiplier in 2019. As of 2024, he is a research fellow at Ark Invest, the same company that has its own spot bitcoin ETF, ARKB. At the time of the creation of the indicator, Puwell was the head of the development department of another investment company – Adaptive Capital. In addition to the multiplier that bears his name, the developer was directly related to another metric – MVRV.

So, what the indicator is is now clear. But a logical question arises: how to interpret it?

Application of the Puwell multiplier

Miners are considered as sellers. They need to cover the costs of special equipment and electricity. Miners may not always do this effectively. The Puwell multiplier helps you find out when it is better to sell cryptocurrency to BTC miners, and when to hold back.

The best moment for miners to sell Bitcoin is when the indicator exceeds the “4″.

At this point, the price of BTC far exceeds the cost of electricity and equipment. The last time the Puwell multiple was above 4 was in early 2018.

If the indicator drops to 0.5, then selling Bitcoin to miners is extremely unprofitable. In this case, it is not only worth delaying sales, but also, perhaps, completely suspending or at least reducing production activities. The last time the indicator was less than 0.5 was in December 2022.

It is worth noting: at the beginning of October 2024, the Puwell multiplier is 0.8. That is, now is not the best time for miners to sell BTC. This, by the way, is an indirect signal for crypto investors.

The Puwell Multiplier and Crypto Investments

Miners are important players in the crypto market. In fact, these are the only entities that are engaged in replenishing the aggregate supply. In cases where it is not profitable for miners to sell, that is, the Puell multiplier shows a low value, such as in October 2024, we can expect an increase in the value of the largest cryptocurrency. If the situation changes, there will be a signal for the BTC price to decrease.

Does Puwell’s cartoonist have a graphical representation?

What does the Puwell multiplier look like?

Yes, the indicator is a regular broken line that changes over time. Its design may vary on different platforms. The essence will be the same. In the figure below you can see one of the options for representing the Puwell multiplier in graphical form:

0710202401.png

Source: bitcoinmagazinepro.com

Does the indicator have any disadvantages?

Disadvantages of the Puwell Indicator

The main disadvantage of the Puwell indicator is its retrospective nature. Essentially, the multiplier compares the current state of affairs with the average for the year. Market conditions can change greatly, and therefore the indicator may provide information that does not correspond to reality. This is indirectly indicated by the modified formula for calculating the indicator compared to the original one.

If we talk about short-term traders, then the Puwell multiplier will not suit them either. This indicator shows long-term historical trends. It does not allow you to make decisions here and now.

Conclusion

The Puwell indicator allows miners to determine profitable and not so profitable moments for selling mined BTC. You can find it on various paid and free platforms:
Glassnode,
CryptoQuantBitcoin Magazine Pro. The indicator is not suitable for short-term trading.