How to view Ethereum's Puell Multiple indicator overbought?

The Puell Multiple helps assess if Ethereum is overbought by comparing daily ETH issuance value to its 365-day average; values above 4 suggest an overvalued market.

Apr 24, 2025 at 07:42 am

The Puell Multiple is a valuable metric for understanding the state of the Ethereum market, particularly when assessing whether it is overbought. This indicator helps investors and traders make informed decisions by providing insights into the relationship between the daily issuance of new Ether (ETH) and its 365-day moving average price. In this article, we will delve into what the Puell Multiple is, how to calculate it, and specifically, how to use it to determine if Ethereum is overbought.

What is the Puell Multiple?

The Puell Multiple was developed by David Puell and is primarily used to gauge the issuance-adjusted value of Ethereum. It is calculated by dividing the daily issuance value of new ETH (the amount of ETH issued daily multiplied by the current ETH price) by the 365-day moving average of the daily issuance value. The formula can be expressed as:

[ \text{Puell Multiple} = \frac{\text{Daily Issuance Value}}{\text{365-day Moving Average of Daily Issuance Value}} ]

This indicator helps to identify periods of extreme overvaluation or undervaluation of Ethereum, which can be crucial for timing market entries and exits.

Calculating the Puell Multiple

To calculate the Puell Multiple, follow these steps:

• Determine the Daily Issuance Value: Multiply the number of new ETH issued daily by the current market price of ETH.
• Calculate the 365-day Moving Average of Daily Issuance Value: Take the daily issuance values over the past 365 days and compute their average.
• Divide the Daily Issuance Value by the 365-day Moving Average: This gives you the Puell Multiple for that specific day.

For example, if the daily issuance of new ETH is 2,000 ETH and the current price of ETH is $2,000, the daily issuance value is $4,000,000. If the 365-day moving average of the daily issuance value is $3,000,000, the Puell Multiple would be:

[ \text{Puell Multiple} = \frac{4,000,000}{3,000,000} = 1.33 ]

Using the Puell Multiple to Identify Overbought Conditions

An Ethereum market is considered overbought when the Puell Multiple is significantly above its historical average. Historically, a Puell Multiple above 4 is often seen as an indicator of an overbought market. This suggests that the daily issuance value of new ETH is much higher than its long-term average, implying that the market may be overvalued and due for a correction.

To use the Puell Multiple to identify overbought conditions, follow these steps:

• Monitor the Puell Multiple: Regularly check the current value of the Puell Multiple.
• Compare to Historical Data: Understand the historical range of the Puell Multiple for Ethereum. Typically, values above 4 are considered high.
• Analyze Market Context: Consider other market indicators and news to confirm whether the high Puell Multiple is indicative of an overbought market.

For instance, if the Puell Multiple for Ethereum is currently at 4.5, this would be a strong signal that the market is overbought. However, it's essential to look at other factors such as trading volume, market sentiment, and technical indicators to confirm this assessment.

Tools for Tracking the Puell Multiple

There are several tools and platforms that provide data on the Puell Multiple for Ethereum. Some of the most commonly used include:

• CryptoQuant: This platform offers real-time data and historical charts for the Puell Multiple, making it easier for users to track and analyze this metric.
• Glassnode: Another popular analytics platform that provides detailed metrics, including the Puell Multiple, for various cryptocurrencies.
• TradingView: While primarily known for its charting capabilities, TradingView also offers custom indicators and scripts that can be used to track the Puell Multiple.

To access the Puell Multiple on these platforms, follow these steps:

• CryptoQuant:

  • Navigate to the CryptoQuant website.
  • Search for Ethereum and select it.
  • Look for the Puell Multiple chart under the "On-chain" or "Indicators" section.

• Glassnode:

  • Go to the Glassnode website.
  • Choose Ethereum from the list of supported assets.
  • Find the Puell Multiple under the "Indicators" or "Metrics" section.

• TradingView:

  • Open TradingView and search for Ethereum.
  • Use the "Indicators" tab to search for custom scripts related to the Puell Multiple.
  • Apply the script to the Ethereum chart to view the Puell Multiple.

Interpreting the Puell Multiple

Interpreting the Puell Multiple requires understanding its historical context and its relationship with other market indicators. Here are some key points to consider:

• Historical Highs: The Puell Multiple has historically reached highs during significant bull markets. For example, during the 2017 bull run, the Puell Multiple for Bitcoin reached values above 4, indicating an overbought market.
• Market Cycles: The Puell Multiple can help identify the different stages of a market cycle. A high Puell Multiple during a bull market can signal that the market is nearing its peak, while a low Puell Multiple during a bear market can indicate potential undervaluation.
• Confirmation with Other Indicators: It's crucial to use the Puell Multiple in conjunction with other indicators such as the Relative Strength Index (RSI), Moving Average Convergence Divergence (MACD), and on-chain metrics like the MVRV ratio to confirm overbought conditions.

For example, if the Puell Multiple is high and the RSI is also in overbought territory (typically above 70), this strengthens the case for an overbought market. Similarly, if the Puell Multiple is high and the MVRV ratio (Market Value to Realized Value) is also elevated, it further supports the notion that the market may be overvalued.

Practical Application of the Puell Multiple

To apply the Puell Multiple in your trading or investment strategy, consider the following steps:

• Set Alerts: Use platforms like CryptoQuant or Glassnode to set alerts for when the Puell Multiple reaches certain thresholds, such as 4 or higher.
• Diversify: If the Puell Multiple indicates an overbought market, consider diversifying your portfolio to reduce risk. This could involve moving some funds into stablecoins or other less volatile assets.
• Take Profits: High Puell Multiple values may be a signal to take profits, especially if you have been holding Ethereum for a while and are looking to lock in gains.
• Re-enter the Market: After a market correction following a high Puell Multiple, look for opportunities to re-enter the market at lower prices. A Puell Multiple below 1 can indicate an undervalued market, potentially presenting a buying opportunity.

For instance, if you notice the Puell Multiple for Ethereum reaching 4.5 and other indicators also suggest an overbought market, you might decide to sell a portion of your ETH holdings to secure profits. Conversely, if the Puell Multiple drops to 0.8 after a correction, it could be a signal to consider buying back into the market.

Frequently Asked Questions

Q: Can the Puell Multiple be used for other cryptocurrencies besides Ethereum?

A: Yes, the Puell Multiple can be applied to other cryptocurrencies that have a similar issuance model. However, the thresholds for overbought and oversold conditions may vary depending on the specific cryptocurrency and its market dynamics.

Q: How often should I check the Puell Multiple for Ethereum?

A: It's advisable to check the Puell Multiple at least weekly, especially during periods of high market volatility. Setting up alerts on platforms like CryptoQuant or Glassnode can help you stay informed without needing to check manually every day.

Q: Is the Puell Multiple the only indicator I should use to determine if Ethereum is overbought?

A: No, while the Puell Multiple is a useful indicator, it should be used in conjunction with other technical and on-chain indicators to get a more comprehensive view of the market. Combining the Puell Multiple with indicators like RSI, MACD, and MVRV ratio can provide stronger signals for overbought conditions.

Q: Can the Puell Multiple predict market tops and bottoms accurately?

A: The Puell Multiple can provide valuable insights into market conditions, but it is not a perfect predictor of market tops and bottoms. It should be used as part of a broader analysis that includes other market indicators and fundamental analysis.