The adjusted puell multiplier for Bitcoin difficulty has been below one recently, which is why this may indicate that BTC miners are still under pressure.
The adjusted Bitcoin difficulty in Puell Multiple still exceeds 1
according to researcher At on-chain analytics company Glassnode, miners are still earning about 12% less than last year’s average. The indicator of interest here is the “puell multiplier,” which measures the ratio between the daily Bitcoin miner returns (in USD) and the 365-day moving average (MA) of the same.
When the value of this metric is greater than one, it means that miners are currently making more than their average for the past year. During these periods, miners generally find mining profitable.
On the other hand, values below this threshold indicate that miners’ returns are below the annual average, which may indicate that this group may be under pressure.
However, there is a problem with the puell multiplier, and that is that it is only based on the price of the cryptocurrency. The scale does not take into account another important factor for miners: mining difficulty.
Mining Difficulty is a feature built into the Bitcoin blockchain that decides how difficult it is to find currently mining blocks on the network. This concept exists because the BTC blockchain aims to keep the block production rate (or more simply, the rate at which miners process transactions) at a constant value.
When the network hashrate (a measure of the total computing power connected to the chain) goes up, miners can hash blocks faster. But because the chain doesn’t want that to happen, it makes it more difficult to slow the miners down enough to get them back up to the desired pace.
Since there is hard, individual miners’ revenue shrinks as the hash rate goes up. This is due to the fact that the block rewards always remain the same (except during halving events, where they are halved), which means that if more miners connect to the network, the individual shares for each participating person become smaller.
The modified puell multiplier is a modified version of the indicator that provides a more realistic representation of miners’ condition, as it accounts for mining difficulty.
Here is a chart showing the trend in this metric over the past several years:
The value of the metric seems to have been below one recently | Source: Glassnode on Twitter
As shown in the chart above, the Bitcoin puell multiplier crossed above one mark earlier in the year when the steady rise in the price of the asset began. Currently, this indicator has a value of 1.2, which indicates that miners as a whole are making significantly more than the annual average.
However, the revised version of the scale is still below one and it has been a complete bear market, even though the price has made a huge rally recently.
At the current level of 0.88, the miners are making 12% below the yearly average, which means they may still be under some pressure right now, although not as severe as during the bear market bottoms.
BTC price
At the time of writing, bitcoin was trading at 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