After Bitcoin on June 28, the cryptocurrency market found itself in a cautiously optimistic state (Bitcoin) The price soared briefly to over US$35,500, rekindling hope that the bull market trend will soon resume.
Despite the bullish trend, some analysts have warned that the failure to ensure that the daily closing price is above the $35,000 resistance level indicates that traders are only closing their positions every time the resistance level is breached, suggesting that there may be further downside.
According to David Puell, an on-chain analyst and creator of Puell Multiple, this indicator has just issued the fifth bitcoin purchase signal in history.
Bitcoin: It is reported that the most awesome indicator has just issued the fifth buy signal in BTC history.
It looks good, yes, but remember that Puell Multiple also reacts to changes in hash rate, and the hash rate follows the price, not the other way around.
— David Puel (@kenoshaking) June 28, 2021
Puell Multiple focuses on the supply side of the Bitcoin economy, mainly Bitcoin miners and their income, and explores the market cycle from the perspective of mining income.
It is calculated by dividing the daily issuance of BTC (in USD) by the 365-day moving average of the daily issuance.
As shown in the figure above, this indicator measures the period when the daily value of issued bitcoins reaches historical lows (indicated by the green box) or historical highs (when the indicator climbs to the red box).
Past instances where Puell Multiple indicated good buying opportunities include mid-2018, when the price of BTC fell below $4,000 during the cryptocurrency winter, and again plummeted in March 2020 due to the Covid-19 pandemic.
It also provided traders with a sell signal at the end of 2017, as the price of BTC peaked at the high of the cycle and during the Bitcoin bull market in 2013.
Miner removal has led to a historical decline in mining difficulty
China’s crackdown on the mining industry has intensified the recent fight against Bitcoin, which has prompted many large mining farms to close and relocate to other countries.The analyst now expects The biggest decline in mining difficulty As the hash rate plummeted from historical highs.
Although miners are generally regarded as mandatory sellers because they need to pay the fixed costs involved in operating a mining business, the recent sale has caused the price to fall by 50%, which means that it is necessary to sell twice the BTC to pay the same legal currency cost and the miners Increased expenses incurred when the business moves out of China.
A cautious trader may be concerned about the fact that the price has fallen after a sharp drop in the hash rate in the past, resulting in reluctance to deploy funds under current market conditions.
Although the price of BTC rose on June 28, Puell warned that multiple factors should be considered and no indicators should be used in isolation to make trading decisions.
“Hash rate is affected by price and other exogenous factors, as we clearly see in the case of China.”
The views and opinions expressed here only represent the views of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading action involves risk, and you should conduct your own research when making a decision.