The Puell Multiple reveals that miners’ income contraction is now greater than during the Great Migration of May-July 2021 when China introduced a blanket ban on crypto mining. The current drop is also worse than during the March 2020 COVID-19 crash, although bear markets in 2014-2015 and 2018-2019 have been definitely worse.
This indicator measures how much profit mining pools currently make compared to the 365-day historical average. When the metric’s value is too high, miners have an incentive to expand their mining rigs and sell some crypto to profit from the bull trend. Similarly, the low value means that many miners go offline as revenues diminish, leading to fewer coins being issued.
The chart also includes a Difficulty Ribbon Compression, an indicator that creates a band of moving averages of mining difficulty to predict Bitcoin price. The current contraction suggests that miners sell their bitcoins to balance costs and then capitulate.
As electricity prices rise and profits decrease, many mining companies are forced to exchange their coins for fiat to make ends meet. For instance, Bitfarms, the largest Bitcoin miner in North America, sold almost half its Bitcoin reserves for about $62m to reduce debts. The company is adjusting its "hodling" strategy to "improve liquidity and strengthen its balance sheet," the press release reads.
"While we remain bullish on long-term BTC price appreciation, this strategic change enables us to focus on our top priorities of maintaining our world-class mining operations and continuing to grow our business in anticipation of improved mining economics," Bitfarms’ CFO Jeff Lucas said.