The Puell Multiple
This metric looks at the supply side of Bitcoin’s economy – bitcoin miners and their revenue.
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.
How It Can Be Used
There are periods of time where the value of bitcoins being mined and entering the ecosystem is too great or too little relative to historical norms.
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 Mayer Multiple
Introduced by Trace Mayer as a way to gauge the current price of Bitcoin against its long range historical price movements (200 day moving average), the Mayer Multiple highlights when Bitcoin is overbought or oversold in the context of longer time frames.
It`s worth noting as the market becomes larger and less volatile, the peaks are becoming less exaggerated. This is because a 200 day moving average baseline is a static yardstick against an ever growing, more stable, Bitcoin market. We should recalibrate what consitutes the overbought / oversold extremes on this chart accordingly.
Until now this chart has been displayed on a linear vertical axis, it`s important to have it plotted on a log chart to remove the visual skewing. (i.e. 10% above and 10% below the baseline should be visually the same distance).
The Stock-to-flow Model
The Pi Cycle Top Indicator
> It has historically been effective in picking out the timing of market cycle highs to within 3 days.
> It uses the 111 day moving average (111DMA) and a newly created multiple of the 350 day moving average, the 350DMA x 2.
Note: The multiple is of the price values of the 350DMA not the number of days.
For the past three market cycles, when the 111DMA moves up and crosses the 350DMA x 2 we see that it coincides with the price of Bitcoin peaking.
Note that 350 / 111 is 3.153, which is very close to Pi = 3.142. In fact, it is the closest we can get to Pi when dividing 350 by another whole number.
How It Can Be Used
Pi Cycle Top is useful to indicate when the market is very overheated.
Overheated > the shorter term moving average, which is the 111 day moving average, has reached a x2 multiple of the 350 day moving average. Historically it has proved advantageous to sell Bitcoin at this time in Bitcoin’s price cycles.
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The Goldern Ratio Multipier
The Golden Ratio Multiplier explores Bitcoin’s adoption curve and market cycles to understand how price may behave on medium to long term time frames.
To do this it uses multiples of the 350 day moving average (350DMA) of Bitcoin’s price to identify areas of potential resistance to price movements. Note: multiples are of the 350DMA’s price values rather than its number of days.
The multiples reference the Golden Ratio (1.6) and the Fibonacci sequence (0, 1, 1, 2, 3, 5, 8, 13, 21). These are important mathematical numbers.
These specific multiplications of the 350DMA have been very effective over time at picking out intracycle highs for Bitcoin price and also the major market cycle highs.
As Bitcoin becomes adopted over time, it’s market cycle highs hit decreasing Fibonacci sequence multiples of the 350DMA. This is because the explosive growth of Bitcoin on a logarithmic scale is slowing over time. As it’s market cap increases it becomes more difficult for the same log scale growth rates to continue.
If this decreasing Fibonacci sequence pattern continues to play out as it has done over the course of the past 9 years, then the next market cycle high will be when price is in the area of the 350DMA x3.
This is an effective tool because it is able to demonstrate when the market is likely overstretched within the context of Bitcoin’s adoption curve growth and market cycles.