Key Bitcoin Price Indicator Issues Its “Fifth Buy Signal In BTC History”

The cryptocurrency market found itself in a cautious state of optimism on June 28. after the price of Bitcoin (BTC) briefly surged above $ 35,500, renewing hopes that the uptrend will resume shortly.

Despite the upward movement, some analysts have warned that Failure to secure a daily close above the $ 35,000 resistance is a sign that traders are simply closing positions at each resistance breakout, an indication that the price could continue to decline.

According David Puell, on-chain analyst and creator of Puell Multiple, the indicator just gave its fifth Bitcoin buy signal in history.

The Puell Multiple focuses on the supply side of the Bitcoin economy, primarily Bitcoin miners and their income, and explores market cycles from the perspective of mining income.

It is calculated by dividing the daily issue value of BTC (in USD) by the 365-day moving average of the daily issue value.

The Puell Multiple equation and its historical performance. Fountain: LookIntoBitcoin.com

As seen in the graphic above, The indicator measures periods in which the daily value of Bitcoin issued reaches historical lows, represented by the green box, or historically high values, which are seen when the indicator moves up to the red box.

Past cases where Puell Multiple indicated good buying opportunities include mid-2018, when the price of BTC fell below $ 4,000 in the middle of the crypto winter and again in March 2020 when prices collapsed as a result of the Covid-19 pandemic.

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It also provided traders with a sell signal in late 2017 as the price of BTC reached the highest point of that cycle, as well as during the 2013 Bitcoin bull market.

Miners purge leads to historic drop in mining difficulty

Recent Bitcoin difficulties have been exacerbated by China’s mining crackdown, which caused numerous large mining farms to close down and relocate to other countries. Analysts are now expecting the biggest drop in mining difficulty in history, as the hashrate plummeted from its all-time highs.

Bitcoin mining difficulty. Fountain: Glassnode

While miners are generally viewed as mandatory vendors due to their need to cover the fixed costs involved in running a mining operation, The recent selling behavior has been followed by a 50% drop in price, which means that twice as much BTC needs to be sold to cover the same costs in fiat, as well as increased expenses incurred by miners moving its operations outside of China.

Cautious traders can focus on the fact that past instances of significant hash rate declines have been followed by price pullbacks, resulting in a reluctance to deploy funds in current market conditions.

Average Bitcoin hashrate rate vs. price. Source: Glassnode

While the price of BTC has made some gains on June 28, Puell offered a word of caution that multiple factors should be considered and no indicator should be used in isolation to make decisions.

Puell said:

“The hash rate follows the price AND other exogenous factors, as we have clearly seen with the situation in China.”

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph. Each investment and trade movement involves a risk, you must carry out your own research when making a decision.

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