Today’s on-chain analysis highlights the famous Puell Multiple indicator, which has broken out of oversold territory in the recent days. Historically, this move was a sign of confirmation that Bitcoin’s macro bottom has been reached.
Reaching lower levels for the price of bitcoin does not necessarily mean the immediate start of an uptrend. Looking at the behavior of the pull multiple after leaving the oversold area, we see that each time the indicator has to test and verify its breakout zone. For BTC price, this means around 3 months of accumulation.
What is Puel Multiple?
Puell Multiple Analyst was created by David Puelle, It is one of the indicators of the health of bitcoin miners. It expresses the ratio between the daily price of bitcoin issuance (in USD) and the 365-day moving average of the daily issuance price. This simple relationship provides a beautiful tool for assessing market cycles from the perspective of profitability of miners.
In an on-chain analysis last month, BeInCrypto reported that the pull multiple has reached an oversold level that historically corresponds to macro lows in bear markets (green circles). This zone is within the green range of 0.3-0.5.
Conversely, the upper red range of 4-10 was reached during the historic peak of the bull market (red circle). In the chart below, we use the 14-day pull multiple average to reduce noise and visualize longer term trends.
Current readings and comparison with the COVID-19 crash
Looking at the current readings, we see that the Pull Multiple has broken out of the green oversold area (blue arrow). Of course, the breakout from the oversold area was made possible by an increase in BTC price, which is up almost 36% from its June 18 lows today at $17,622.
It is interesting to compare the current movement of the Puell Multiple with the previous situation when the indicator left the green zone. This happened during the COVID-19 crash in March-June 2020, when bitcoin hit a macro bottom of $3782 (red circle).
However, the Puel multiple did not move into the oversold area until a few weeks later (green circle). By then, bitcoin was already in the midst of a V-shaped recovery, rising nearly 150% and prompting the indicator to exit the green oversold zone. We are seeing a similar pattern today.
waiting to test again
Looking again at the long-term chart of the Pull Multiple, we see a definite correlation between the breakout from the green zone and BTC price. Firstly, each time after a breakout, the indicator appears to return to confirm the oversold area (blue rectangle). It doesn’t always do it properly and touches the green zone, but the corrective momentum is evident after the first upward phase.
Then, after confirming the oversold area as support, the Pull Multiple continues its upward move. Interestingly, the growth of the indicator in the first weeks is not correlated with the increase in the BTC price. During this period, bitcoin always went through an accumulation phase of about 3 months, which begins a few weeks after the macro bottom (yellow rectangle) was generated.
If a similar situation repeats now, the start of an uptrend for BTC could be initiated around October-November 2022. In addition, it would be worth waiting for the aforementioned retest of the pull multiple indicator, which would have to be kept up. Green oversold area. A clear consolidation of the indicator and BTC price would be a strong indication for the thesis that BTC reached a macro bottom in June.
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