Bitcoin has witnessed triple-digit percentage gains over the past two months. Yet, one metric has turned quite bullish after the recent halving event, showing signs the cryptocurrency remains undervalued and still has room to run. 

The largest cryptocurrency by market capitalization is trading near $9,700 at press time, up 150% from its March 12 low of $3,867.

And while that may cause some investors to think the cryptocurrency is overbought or overvalued, an on-chain metric called the “Puell Multiple”, which marked a price bottom in March, is suggesting otherwise. 

The Puell Multiple is calculated by dividing the daily issuance value of bitcoins in U.S. dollar terms by the 365-day moving average of the daily issuance value. It is currently just below 0.5, according to the data provided by the blockchain intelligence firm Glassnode.

puell-multiple-2020Puell Multiple 2020Source: Glassnode

A reading below 0.5 indicates the value of the newly issued coins on a daily basis is quite low compared to historical standards. Historical data shows bear markets tend to end with the Puell Multiple’s drop below 0.50.

Read more: Bitcoin’s Impending Golden Cross May Bolster Bulls: Analysts

The Puell Multiple is usually influenced by gyrations in price. For instance, if prices drop the dollar value of the daily issuance declines, pushing the ratio lower. 

Daily issuance refers to the number of coins added to the ecosystem by miners, who receive them as rewards for mining blocks on the cryptocurrency’s blockchain. Miners mainly operate on cash and cover the cost of mining by offloading their holdings by selling into the market. 

However, reduced supply from miners can also weigh on the Puell Multiple. That seems to be the reason behind the ratio’s recent downward move. 

Low reading from bitcoin halving

The latest below-0.5 reading on the Puell Multiple is the result of a programmed reduction in the daily issuance.

Bitcoin underwent its third reward halving on May 11, following which rewards per block mined fell to 6.25 BTC from 12.5 BTC. The non-price metric dropped from 1.13 to 0.41 immediately following halving and looks to have bottomed out at 0.37 on May 17.

To put it another way, daily miner supply has declined significantly since May 11 due to halving and the resulting miner capitulation – the small and inefficient miners are scaling back operations due to reduced profitability.

Read more: First Mover: Bitcoin Difficulty Adjustment Feels Like Post-Halving Easing Party

The seven-day average of the hashrate, or the mining power recruited to mine blocks on the blockchain, has declined from 120 exa-hashes per second to below 100 exa-hashes, according to data source CoinMetrics. 

Lows in Puell Multiple seen following the previous halvings, which took place in July 2016 and November 2018, had marked the beginning of fresh bull runs in bitcoin’s price. 

puell-2016Puell Multiple 2016Source: Glassnode

Bitcoin underwent its second halving on July 9, 2016, pushing the Puell Multiple lower from 1.59 to 0.72 in the four days to July 13. The metric eventually bottomed at 0.59 in mid-August. The price low of $450 seen in the first week of August has never been put to test till date. 

Similarly, the Puell Multiple fell from 1.57 to 0.70 in the two days following the first reward halving of Nov. 28, 2012. The gauge bottomed out at 0.62 three weeks later. The cryptocurrency’s low of $12.30 seen on the halving day was the last time that price was ever seen.  

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