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After three months of freefall, Bitcoin (BTC) wrapped the month of July with more than 16% gain for the first time since October 2022. The rally was in tandem with Nasdaq as riskier assets gained on bets that Fed could dissuade from aggressively tightening monetary policy in coming months. Globally, weak economic data has forced central banks to reconsider their decisions to hike interest rates. Riskier crypto assets such as Ethereum (ETH), which promises to pioneer the world of decentralized finance, were in high demand with its July gains crossing 50%. Bitcoin is currently trading at $22,800 with a 7-day gain of 8%. In today’s article, we will understand which leading indicator was signaling to buy Bitcoin along with an overview of top altcoins.
Puell multiple is a metric that estimates the level of sell pressure in the market coming from miners. The metric focuses on supply dynamics of the Bitcoin network, basically miners and their revenue. Miners are crucial in understanding market cycles as they are sometimes forced to sell under high volatility to cover hardware costs. So, their selling behaviors influence the price of Bitcoin over time.
The Puell Multiple is calculated by taking the daily coin issuance and dividing it by the previous year’s daily moving average of coin issuance. The concept is that there are certain periods of time where the value of Bitcoins entering the market from mining is either high or low. Puell multiple indicates at which period one can buy to increase chances of making great returns.
<source: lookintobitcoin.com>
The chart above indicates periods where the value of Bitcoin's issued on a daily basis has historically been extremely low (Puell Multiple entering green region), which produced massive returns for Bitcoin investors who bought Bitcoin here. It also shows periods where the daily issuance value was extremely high (Puell Multiple entering the red region), providing profit-taking opportunities for Bitcoin investors who sold here.
The Puell Multiple remains one of the most reliable macro bottoming signals for Bitcoin. This is likely because it is deeply rooted around miner profitability which is fundamental to the production and existence of the Bitcoin network. As you can observe on the above chart, the previous bottom signals were in Nov. 2011, Jan. 2015, Nov. 2018 and May. 2020. Recently, Puell multiple indicated that July 2022 was a macro bottom.
With ETH leading the way in July by gaining more than 50%, several altcoins registered double digit gains in the last seven days. Ethereum classic (ETC) jumped by 41% whereas Polygon (MATIC), Polkadot (DOT) and Solana (SOL) raked in more than 10% over the last week. With Merge upgrade, ETH will transition from a proof of work to proof of stake consensus mechanism. This obviously has resulted in taking sides among the Ethereum community who are against the Merge. ETC, which is basically a hard-fork of Ethereum, has been receiving quite some trading volume as Ethereum founder Vitalik Buterin endorsed ETC for those who don’t want to use ETH 2.0.
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Disclaimer: This article was authored by Giottus Crypto Exchange as a part of a paid partnership with The News Minute. Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.