• The Bitcoin Difficulty Adjusted Puell Multiple (DAPM) has been below 1 recently, indicating that miners are earning less than their average for the past year.
• The DAPM does not take into consideration an important factor for miners—mining difficulty—which can squeeze miner revenue when more miners join the network.
• A modified version of the DAPM, which takes into account mining difficulty, may provide a more accurate picture of miner profitability.
What is the Bitcoin Difficulty-Adjusted Puell Multiple?
The Bitcoin Difficulty Adjusted Puell Multiple (DAPM) is a metric that measures the ratio between daily Bitcoin miner revenue (in USD) and 365-day moving average (MA) of the same. When this value is greater than one, it means that miners are currently making more than their average for the past year. On the other hand, values below this threshold imply that miner revenues are below their yearly average, possibly suggesting that these miners may be under pressure.
Why Does Mining Difficulty Matter?
Mining difficulty is a built-in feature of the Bitcoin blockchain designed to keep block production rate constant by increasing whenever hashrate goes up too much. This implies smaller individual shares of rewards for all connected miners if there are more participants in mining activity on the network. Therefore mining difficulty affects individual earnings and must be taken into account when assessing miner profitability.
What Is The Difference Between The Regular And Difficult Adjusted Puell Multiple?
The regular puell multiple only depends on cryptocurrency price whereas its adjusted version takes into account mining difficulty as well in order to provide a more accurate picture of miner profitability.
The DAPM helps identify periods where BTC miners may be coming under pressure due to lower than usual earnings compared to their averages over time; however, it fails to consider how mining difficulty affects individual profits making it unreliable at times. To overcome this limitation, researchers have developed an adjusted version which takes into account both prices and mining difficulties when trying to gauge miner profitability on Bitcoin’s network.