Miner data indicates Bitcoin may have bottomed
To find the coveted Bitcoin bottom, you must look at more than just the price. Miner data has historically been one of the most dependable indications of market bottoms. Miners, widely regarded as one of the most resilient actors in the crypto ecosystem, succumb only when Bitcoin becomes too expensive to mine.
Hash ribbons are a unique metric for determining whether the market is in a bear or bull phase. The indicator includes Bitcoin's hash rate's 30-day and 60-day simple moving averages (SMAs). The 30-day SMA falling below the 60-day SMA indicates the start of a bear market and miners beginning to capitulate.
According to data, the market has been in a miner capitulation mode for about 60 days. When the 30-day SMA crosses over the 60-day SMA, the worst of the miner capitulation will be done. However, the difference between moving averages remaining steady for days on end makes it difficult to predict when a trend may reverse. However, an examination of miner balances reveals that the worst has gone and miners are beginning to recover. Miner balances examine the overall supply held in miners' addresses to establish whether they've been selling off their assets. According to Glassnode data, miner balances have rebounded from the lows experienced in June and are now at their highest level since October 2017. (highlighted in red).
In addition to balances rebounding, we've observed miner withdrawals from exchanges briefly outnumber inflows to exchange addresses. This indicates that more miners are withdrawing their BTC from exchanges rather than depositing it to sell on the market. The difficulty adjustment also suggests that Bitcoin has possibly struck its bottom. The difficulty adjustment, defined as the current projected number of hashes necessary to mine a block, increased for the first time since June, climbing by 1.7%. The rise suggests that the Bitcoin mining difficulty may have peaked in early August. If Bitcoin can maintain its price near the R386K level, we may not see these mining difficulty lows again anytime soon.
Finally, another reliable indicator of market bottoms appears to be flashing red as well. The Puell Multiple is a mining probability indicator that calculates the ratio of daily coin issuance in USD to the 365-day moving average of daily coin issuance value. When the Puell Multiple is low, miner profitability is low in comparison to the yearly average. When the indicator is high, miner profitability is strong, and miner treasuries are incentivized to be liquidated.
The Puell Multiple has reliably predicted prior cycle bottoms, flashing bottom signals in November 2011, January 2015, November 2018, and May 2020. Data shows that the Puell Multiple has left the green zone for the first time since June and is progressively rising. And, while the signal has fluctuated between green and red in previous market cycles, the outlook remains good.
