The Bitcoin Buy Zone signal giving by this indicator - Puell Multiple
It’s interesting that a Bitcoin indicator recently “flashed green”, signalling a buy zone during the March 12th crash, when BTC prices fell from 10,000$ to below 4000$ levels. This indicator is the Puell Multiple indicator.
The Puell Multiple indicator can be looked up at Bitcoin data analytics sites like - https://www.lookintobitcoin.com/ or glassnodes. The indicator calculates the value of the current Bitcoin being issued in terms of its historical valuation. It is derived by computing the value of Bitcoins in daily issuance in it’s USD value then dividing it by its 365 day moving average.
Look up the formula at lookintobitcoin web site.
Note -: The Bitcoins getting issued are those Bitcoins mined by Bitcoin miners who earn rewards for it.
The Green Zone signal flashed by the Puell Multiple - Time to Buy
When the Puell Multiple falls into the green zone, it means that the value of bitcoins being issued is undervalued compared to Bitcoin’s general historic valuation. This green zone signals an attractive buy zone and the value range here is from 0.1 to 0.5 range.
It is believed that this is a profitable point to buy and accumulate Bitcoin for long term Bitcoin holders. As this usually marks the end of a bear market cycle, signaling that the price falls has finally levelled and bottomed out.
Red Zone signals flashed by the Puell Multiple - Time to sell and Book Profits!!
Then generally from this point onwards there will be a spike in prices, to a point where the Puell Multiple indicator would flash red.
When the indicator enters the red zone, it signals that now Bitcoin’s daily issuance value is overvalued compared to its historical price valuation. This is the time to sell Bitcoins and book profits.
The red zone value ranges from 3 to 10 number ranges.
Analysis of previous Bitcoin Price cycles by applying the Puell Multiple indicator logic
Looking at the onset and completion of the Bitcoin bull price cycle of 2015, that was well recognized by the Puell Multiple indicator.
On 17th Jan 2015, Puell Multiple indicator fell into the green zone touching the 0.3 range. This marked a phase where Bitcoin prices gradually increased from 175$ reaching over 19,000 $ on 16th Dec 2017 at which time the Puell Multiple indicator flashed red at the number range of 6.
A Green Zone indication by the Puell Multiple can mean end of a Bear cycle phase
After that period, a bear cycle emerged where Bitcoin price fell reaching to the lows of 3200$ and the Puell Multiple indicator turned green falling into the ‘buy zone ‘ at the number range of 0.3, signifying the ending of the bear market.
Since that fall of Bitcoin to the levels of 3200$, Bitcoin has still not risen up to that range where the Puell Multiple indicator enters the red, ‘sell zone’, however, it had reached a peak of 14,000$ last year.
A Red Zone indication by the Puell Multiple can mean end of a Bull cycle phase
On March 12th, when the huge sell off took place taking Bitcoin below 4000$ levels, the Puell Multiple fell into the Green Zone, meaning that it was an appropriate time to buy Bitcoins to profit through the ongoing bull phase with rewards of price appreciation in the long term until that Puell Multiple indicator enters the Red Zone, which signifies the end of the bull phase of the Bitcoin price.