What is Pewella’s multiplier and how to use it?
A multiplier based on the yield of Bitcoin miners, in 2019 was proposed by the developer of another popular hens-indicator called MVRV David Pewell. However, the popularity of the instrument came after the publication of cryptoenthoesist Cryptopoiesis, in which he described the benefits of the indicator.
These levels are limited only by the opinion of analysts and their interpretation of historical data. Over time, levels can change. For example, the two previous local peaks formed in March 2021 and July 2019 were lower than the values of 4 and 3.5, defined as the top of the cycle.
Risks and disadvantages of using the multiplier Pewella
Using the Pewella multiplier as a tool for analysis in the process of making trade decisions can lead to unexpected losses. There are several basic risks that should be taken into account in the process of studying and making decisions.
The multiplier applies a too generalized approach to the analysis of market cycles and suggests that the profitability of mining depends solely on the price of bitcoin. Every year, the structure of the mining market is changing, this business becomes more complicated, requiring carefully thought -out solutions for the distribution of capital.
Mining profitability may include completely different sources of profit, including active trading or investment. It is difficult to assume what sources of income the miners will be in the future and what exactly will encourage them to sell or accumulate bitcoin.
The market conditions at the time of development of the multiplier can be very different from today’s and future market cycles of bitcoin. The profitability of mining, embedded in the logic of the interpretation of the coefficient, is a too generalized indicator without taking into account the features of local players in the market. Incorrect interpretation of the behavior of the multiplier can lead to incorrect conclusions.
The Pewella animator is designed to analyze long -term market cycles and is not used to determine short -term trends https://gagarin.news/news/vitalik-buterin-expressed-his-opinion-on-the-potential-of-cryptocurrencies/.