Bitcoin Miners Are Still Under Pressure, Here’s Why
Bitcoin’s difficulty-adjusted puell multiple has been below one recently, which is why this might suggest that BTC miners are still under pressure.
Puell multiple adjusted for Bitcoin difficulty yet to exceed 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 relationship between a Bitcoin miner’s daily revenue (in USD) and its 365-day moving average (MA).
When the value of this metric is greater than one, it means that miners are earning more than last year’s average. During these periods, miners generally find mining profitable.
On the other hand, values below this threshold imply that the miner’s revenues are below the annual average, possibly suggesting that this group may be under pressure.
There is a problem with puell multiple, however, is that it only depends on the price of the cryptocurrency. The metric does not take into account another important factor for miners: the difficulty of mining.
Mining difficulty is a built-in Bitcoin blockchain feature that decides how difficult miners would currently find to mine 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 handle transactions) at a constant value.
When the network hashrate (a measure of the total computing power connected to the chain) increases, miners are able to hash blocks faster. But since the network doesn’t want that to happen, it increases the difficulty to slow miners down just enough to get them back up to speed.
Due to the existence of the difficulty, the income of individual miners decreases whenever the hashrate increases. This is due to the fact that 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 of everyone involved will 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 represents the mining difficulty.
Here’s a graph that shows the trend of this metric over the last 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 the one mark at the beginning of the year, when the continued rally in the asset’s price began. This metric currently has a value of 1.2, suggesting that miners as a whole are earning much more than the annual average.
The difficulty-adjusted version of the metric, however, is still below one and has been throughout the bear market despite the price seeing a significant increase recently.
At the current level of 0.88, miners are earning 12% less than the annual average, meaning they could still be under some pressure at the moment, albeit not as severe as during the bear market lows.
BTC price
At the time of writing, Bitcoin is trading around $30,400, up 9% over the last week.
Looks like BTC has sharply surged | Source: BTCUSD on TradingView
Featured Image by Brian Wangenheim at Unsplash.com, Charts by TradingView.com, Glassnode.com