Bitcoin Miner Activity Falls To Extreme Silence – Bullish Signal Or Not?

Since the bear market commenced in October, Bitcoin market participants have watched out for a price bottom that should precede definitive expansions of the flagship cryptocurrency. Interestingly, a recent evaluation of on-chain data reveals that the Bitcoin market might be approaching the end of this price downturn; however, there is an important caveat.

Miners’ Position Index Falls To Historical Lows – What It Means For Price 

On-chain analyst MorenoDV recently revealed on CryptoQuant’s QuickTake an interesting decline in Bitcoin miners’ activity. This observation was based on evidence from the Bitcoin: Miners’ Position Index (MPI) metric, which monitors whether Bitcoin miners are selling more or less of their holdings than usual, thus indicating the potential injection of sell pressure into the market. 

According to the on-chain analyst,  the MPI recently fell to -1.04, representing one of the lowest levels reached in Bitcoin’s history, and also the third time the 30-day MA has come close to the -1 level. Low MPI levels, as those of the current readings, typically signal reduced selling activity among the miners, meaning the selling pressure from this group is significantly low, perhaps due to increasing block reward accumulation, or expectations of higher BTC prices, or both. 

Generally, this development is interpreted as a bullish signal; however, extremely low readings on the MPI metric only signal a reduction in distribution, and not an equal increase in demand. As such, this “bullish sign” is still incomplete, especially as it does not mark out price bottoms. Notably, MorenoDV points out that most cyclical lows in the BTC price were actually not in perfect sync with extreme MPI readings. Instead, these occurred at moments where the metric was already recovering from extreme lows.

Puell Multiple Records 60-Day Compression — What’s Happening?

In a separate post on QuickTake, on-chain expert RugaResearch provides more insight on Bitcoin miners’ activity by stating the Puell Multiple has been between the 0.56 and 0.98 levels since the final days of January. For context, this metric compares how much miners are currently earning against their 365-day average.

The crypto pundit explains that when the metric shows readings below the threshold of 1 for a prolonged period, miners might be forced to sell some of their Bitcoin. This typically causes more bearish pressure to enter the market, further increasing the likelihood of price downturns.

At press time, the Puell Multiple stood at around 0.663, solidly maintaining its position within the earlier-mentioned range. Historically, extended periods within this range have preceded the Bitcoin price forming a bottom. Notably, RugaResearch cites mid-2018 to early 2019, where the Puell Multiple was suppressed for months before price bottomed at around $3,200.

As is the case with the Miner Position Index, the Puell Multiple does not automatically signal where a price floor would be established; yet, it signals the proximity of a floor formation. As such, investors would have to remain cautious of a final dip before the real bottom.

At press time, Bitcoin trades for $68,686, reflecting a devaluation of more than 2.6% since the past day.