Fidelity Digital Assets has adjusted its outlook for Bitcoin from “positive” to “neutral” after analyzing various metrics that indicate Bitcoin is no longer undervalued and may face sell pressure. Fidelity’s Signals report, released on April 22, highlighted the Bitcoin Yardstick, which determines if Bitcoin is undervalued by comparing it to the Price-to-earnings ratio used in stocks. The report revealed that Bitcoin remained at fair value in the first quarter, with no days where it was considered cheap. This, along with other metrics such as long-term holders adding to sell pressure and a high percentage of addresses in profit, led Fidelity to revise its medium-term outlook for Bitcoin to neutral.
Fidelity also mentioned on-chain metrics like the Net Unrealized Profit/Loss (NUPL) ratio and the MVRV Z-Score, which assess Bitcoin’s over or undervaluation relative to its fair value. While Fidelity maintains a positive short-term outlook for Bitcoin, citing potential profit-taking at the end of Q1 2024, it stated that there are no extreme indicators commonly seen during bull market peaks. Price levels remaining above a “golden cross” on the Bitcoin chart, with the asset trading above its 50-day and 200-day moving averages, indicate bullish momentum, according to Fidelity.
The report also discussed Bitcoin’s realized price, which captures the average cost basis of all current coin holders. The realized price was approximately $28,000 at the end of Q1 and has maintained support since mid-January. On-chain data revealed continued accumulation by smaller investors, with the number of addresses holding $1,000 worth of BTC increasing by 20% since the beginning of the year and reaching all-time highs. Fidelity also noted a decline in exchange balances as more investors opt for self-custody, reducing selling pressure.
Fidelity’s director of research, Chris Kuiper, stated that the on-chain indicators are no longer at extreme lows, suggesting a middle-ground or halfway point in the market cycle. Bitcoin has been range-bound since the end of February, fluctuating between $72,000 and $60,000. However, it has seen a 5% increase since the recent halving event and is currently trading at a ten-day high of $66,863.