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It explores market cycles from a mining revenue perspective. Bitcoin miners are sometimes referred to as compulsory sellers due to their need to cover fixed costs of mining hardware in a market where price is extremely volatile. The revenue they generate can therefore influence price over time.
The Puell Multiple is calculated by dividing the daily issuance value of bitcoins (in USD) by the 365-day moving average of daily issuance value.
Understanding these periods of time can be beneficial to the strategic Bitcoin investor.
The chart above highlights periods where the value of Bitcoin's issued on a daily basis has historically been extremely low (Puell Multiple entering green box), which produced outsized returns for Bitcoin investors who bought Bitcoin here. It also shows periods where the daily issuance value was extremely high (Puell Multiple entering red box), providing advantageous profit-taking for Bitcoin investors who sold here.
The Puell Multiple uses the upper red band on the chart to show when miner revenues in USD terms are significantly higher than historical norms (in this case the 365-day moving average). Over the majority of Bitcoins’ existence, these periods have been when the price of $BTC has also reached its major highs. So the Puell Multiple can be a useful Bitcoin forecasting tool to identify based on this metric whether price is too high and needs to drop (when the indicator is in the red zone), or whether it is too low and may need to bounce (indicator is in the green zone).