Puell Multiple - this is how we win the bull run
front-running the BTC miners (who control 13% of the supply)
Welcome 👋🏽
Today, we cover:
The Puell Multiple (PM). An on-chain indicator that’s going to make us BANK by the end of this bull run.
the status of all 29 ‘Selling the Top of the Crypto Bull Run’ indicators.
⚠️ DISCLAIMER ⚠️
The content provided by PROJECT 10X PTY LTD (Filip Brnadic) is for educational purposes only and is not financial or investment advice. PROJECT 10X PTY LTD is not a licensed financial adviser under Australian law.
Investing involves risk, including the potential loss of all funds. Seek independent advice before making any financial decisions.
I’m a Power Systems Engineer by trade.
Hope is not part of my DNA 👇🏼
My only job is to take the guesswork out of ‘selling the top’. I do this by sharing my exit strategy which includes
➡️ 12 years of back-tested historical data; and
➡️ 4 years of careful curation
If that’s not what you’re here for, then….
If that’s precisely what you’re expecting, then….
If you’re thinking,
“Doesn’t this guy have enough indicators? Does he really need another one?”
The answer is yes - but hear me out!
The Puell Multiple is an on-chain indicator, which means it can visually represent the predictability of human behaviour. Given that I do not have an indicator that “anticipates what miners are likely to do” or captures miner revenue as an on-chain metric, it seems fitting to add one to my arsenal, especially if the indicator slaps!
So, what is this Puell Multiple you speak of? 🤔
It is an indicator that measures BTC miner profitability by comparing the daily issuance value of BTC in USD to its 365-day moving average. It helps identify potential market tops and bottoms by highlighting periods of overvaluation or undervaluation relative to historical norms.
How does the indicator work? 📈
If you’ve seen the PM indicator before, you’ve probably seen it in this form 👇🏼.
Red is a sell zone and suggests BTC’s daily issuance value is overvalued compared to its historical price.
Green is a buy zone and suggests BTC is undervalued, with miner revenues significantly below historical data.
Fantastic, right? Eh, not really, but I’ll get to that a little later.
Why is it an effective indicator? 🔴
To understand that, you first need to understand how BTC miners like Marathon Digital make money, and it involves two primary sources:
Block Rewards: Miners receive newly minted BTC as a reward for successfully adding a block to the blockchain. This reward halves every ~4 years.
Transaction Fees: Miners also earn fees from transactions included in the blocks they confirm. As block rewards decrease over time, transaction fees become a more significant part of miners' revenue.
The PM is an effective indicator because it highlights periods when miner profitability is significantly above the historical average. This is an early warning signal for a potential cycle top due to increased sell pressure from miners cashing out profits. Remember, these miners hold ~13% of the supply.
Why would BTC miners be selling the best-performing asset on the planet? 🤪
What has NVIDIA’s CEO been doing since June 14? He has been selling shares every single trading day and wont stop until 31 March 2025.
What have the NVDA 0.00%↑ Directors and Insiders been doing for the last 12 months? You guessed it! Offloading their stock options, company bonuses etc.
Is it because NVIDIA has no value? No. Is it because NVIDIA is a bad stock? Of course not! It is because the stock is up ~2.6x in 12 months and ~10x in 24 months. Any average person would take lifestyle chips off the table at these overvaluations.
Now let’s bring this back to BTC miners. I’ll use the last bull run as an example.
In the 12 months prior to the April 2021 local top, BTC did a ~9x. In the 24 months prior, BTC did a ~13x.
What would you do if you made a 9 to 13x on your investment? Now, put yourself in the shoes of the leadership team of the publicly listed mining companies. When the mark-up on the service you are providing is 13x, what are you going to do? Sell the f*** out of it to secure your bonuses and keep your shareholders happy!
I know I keep larping on about it, but crypto, equities, markets, trading, macro - it all comes down to human psychology.
Could we make the indicator more effective? 🎯
Abso-too-ta-fu****-lutely! I mean, you’re not paying me to regurgitate some BS off of Google, are you?
Do you notice how the peak value of the PM (shown by the yellow circles) has decreased over the last three cycles?
the peak decreased by -14% from 2013 to 2017
the peak decreased by -51% from 2017 to 2021
I actually can’t believe more people aren’t talking about this, but a decreasing PM is expected, so a downward-sloping ‘top signal’ trendline is more appropriate than your standard horizontal 'top signal’ zone.
Why is a downward-sloping trendline appropriate?
A sloping line better accounts for the evolving nature of the market, capturing the broader (downward-sloping) trend rather than fixed historical extremes.
Why would the Puell Multiple decrease over time?
Due to the impact of BTC halving events.
Why?
Supply Reduction: BTC’s halving events reduce the block reward miners receive by 50% every ~4 years. Block rewards constitute a significant portion of miners' revenue, and each halving diminishes this inflow. If we look at the formula, we see that a reduced Puell Multiple makes sense👇🏼
If mining revenue = block rewards + transaction fees, then reducing the block rewards leads to 👇🏼
Decreased Miner Revenue: As new BTC awarded decreases, miners' overall daily revenue relative to the 365-day moving average (MA) declines. This results in a lower Puell Multiple and also a diminished impact of reward-based volatility in miner earnings.
Show me the money! (performance) 📈
Sure - let’s see how close the PM gets to signalling at the All Time High (ATH).
2013:
ATH Price: $1,163
Price when indicator signals 🔴: $800
Price difference (Δ) to ATH: -31%
Time Δ to ATH: +1 week
2017:
ATH price: $19,666
Price when indicator signals 🔴: $11,250
Price Δ to ATH: -43%
Time Δ to ATH: +2 weeks
2021:
ATH Price: $64,895
Price when indicator signals 🔴: $57,493
Price Δ to ATH: -11%
Time Δ to ATH: +5 and +8 weeks, respectively
Bottom Line 🏁
It’s clear to me that if a group of entities hold ~13% of the supply of the asset that dictates the direction of the crypto market then we want to track when the entities are incentivised to offload their bags.
Given there is an on-chain indicator that provides this insight, most of the work is done for us. However, I’ve shown that the BTC halving fundamentally alters the dynamics of BTC mining revenue. As such, a downward sloping ‘top signal’ trendline is more appropriate than a horizontal top signal.
I am adding the Puell Multiple which has successfully called tops to the ‘selling the top’ series. It serves as an additional data point to capture miner incentives an on-chain metric.
Having said that, I would never use a single indicator to time the top of a bull run unless you want to end up like my friend here 👇🏼
I’ve given you 30+ ‘selling the top’ indicators to paint a complete picture. Go out into the world and use them!
If you want me to do the heavy lifting for you, grab yourself a paid subscription for $2 a week.
Enough about PM; what are all the indicators signalling?