Since the bear market began in October, Bitcoin market participants have been watching for a price bottom to appear ahead of a clear expansion for the flagship cryptocurrency. Interestingly, an evaluation of recent on-chain data reveals that the Bitcoin market is nearing the end of its price decline. However, there is an important caveat.
Miner Position Index Falls to Historic Low – Impact on Prices
On-chain analyst MorenoDV recently revealed an interesting decline in Bitcoin miner activity on CryptoQuant’s QuickTake. This observation was based on evidence from the Bitcoin: Miner Position Index (MPI) indicator, which monitors whether Bitcoin miners are selling more or less of their holdings than usual, indicating that there is likely to be selling pressure on the market.
According to on-chain analysts, the MPI recently fell to -1.04, marking one of the lowest levels in Bitcoin history, and also the third time the 30-day MA has come close to the -1 level. Low MPI levels, such as the current figures, typically indicate reduced selling activity among miners. This means that there is significantly less selling pressure for this group, either due to increased block reward accumulation or expectations of a higher BTC price, or both.
Typically, these developments are interpreted as bullish signals. However, an extremely low reading of the MPI indicator only indicates a decrease in distribution and does not indicate an equal increase in demand. Therefore, this “bullish signal” is still incomplete, especially since it does not indicate a price bottom. In particular, MorenoDV points out that most cyclical lows in BTC price are actually not perfectly synchronized with extreme MPI readings. Instead, this occurred at a moment when indicators were already recovering from extremely low levels.
Puell Multi-Record 60-Day Compression — What’s Happening?
In a separate post on QuickTake, on-chain expert RugaResearch provides more insight into the activity of Bitcoin miners by saying that the Puell Multiple has been between the 0.56 and 0.98 levels since the last day of January. For context, this metric compares how much a miner currently earns on average over a 365-day period.
The cryptocurrency expert explains that if the indicator shows below the threshold of 1 for an extended period of time, miners may be forced to sell some of their bitcoins. This usually creates more bearish pressure entering the market, making prices more likely to fall.
At press time, the Puell Multiple remained firmly within the aforementioned range at approximately 0.663. Historically, long periods within this range have occurred before Bitcoin price bottomed. In particular, RugaResearch notes that from mid-2018 to early 2019, the Puell Multiple was suppressed for several months before the price bottomed out at around $3,200.
As is the case with the Miner Position Index, the Puell Multiple does not automatically tell you where the floor price limit is set. However, this is a sign that a bottom may be nearing formation. Therefore, investors will have to watch out for a final decline before the actual bottom.
At press time, Bitcoin is trading at $68,686, reflecting a devaluation of more than 2.6% from the previous day.
Featured image from Pexels, chart from Tradingview
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