The Bitcoin Puell Multiple, a metric that gauges the cryptocurrency's value, has recently plummeted, indicating that Bitcoin is currently undervalued. This plunge marks the first time the Puell Multiple has entered the "undervalued" territory in over a year. The Puell Multiple is a vital on-chain indicator that assesses the ratio between Bitcoin miners' daily revenue and the 365-day moving average (MA).

Miners generate income through two primary sources: block rewards and transaction fees. The block reward is a fixed compensation for adding a block to the network, while transaction fees are payments for processing individual transactions within that block. Notably, the Puell Multiple only considers block rewards in miners' revenue. Since block rewards are fixed in terms of Bitcoin value, the sole variable is the USD value of these rewards. Consequently, the indicator measures revenue in USD, establishing a direct connection between the cryptocurrency's price and the Puell Multiple.

When the Puell Multiple surpasses 1, it signifies that miners have earned more than the average for the past year. In such cases, the asset's price may be considered overvalued. Conversely, if the indicator falls below this threshold, miners are likely making less than usual, suggesting that the coin may be undervalued. The recent sharp decline in the Puell Multiple's value indicates that miners are currently earning less than usual, implying that Bitcoin is undervalued.

The graph illustrating the 7-day MA of the Bitcoin Puell Multiple reveals that it was at relatively high levels during the recent rally toward the new all-time high. However, the indicator's value has plummeted sharply in recent days. Despite this, the cryptocurrency's price has been consolidating sideways, prompting questions about what has changed in miner revenues if the price hasn't dropped.

The block rewards, which are a significant component of the Puell Multiple, almost always remain constant. However, there is an exception – the Halving event, which occurs approximately every four years. During this event, the asset's block rewards are permanently slashed in half. The latest Halving occurred last month, contributing to the Puell Multiple's steep drop. With this drawdown, the indicator's 7-day MA is now below 1, a signal that investors may interpret as a sign that the market is adjusting to a new phase of scarcity, potentially preparing for a rally.

At the time of writing, Bitcoin is trading at around $67,800, reflecting a 5% increase over the past week. This development, combined with the Puell Multiple's decline, suggests that Bitcoin may be entering a "buy zone." The Puell Multiple's current position below 0.5 indicates a strong buy signal, aligning with the views of stakeholders like Budd White, the chief product officer at crypto software company Tacen, who believes BTC is "incredibly undersold." As the market continues to evolve, investors are closely monitoring these metrics, anticipating potential breakouts and rallies in the cryptocurrency space.