Bitcoin Isn’t Cheap Anymore, States Fidelity Report

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Fidelity Digital Assets has revised its medium-term outlook for Bitcoin (BTC) from “positive” to “neutral” following the first quarter of 2024. The decision comes as several metrics indicate that Bitcoin is no longer considered “cheap” and may face potential selling pressure.

In its latest Signals report released on April 22, Fidelity Digital Assets introduced the Bitcoin Yardstick, similar to the price-to-earnings ratio used in stocks, to determine if Bitcoin is undervalued. 

Fidelity noted that the Yardstick remained between a negative one and zero deviations from the mean of 51% in the first quarter, indicating that Bitcoin was not considered ‘cheap’ at any point during Q1.

Bitcoin is Trading at a ‘Fair Value’

This suggests that Bitcoin is now trading at “fair value,” leading Fidelity to revise its medium-term outlook for Bitcoin to neutral. Other metrics supporting this neutral outlook include long-term holders increasing sell pressure and 99% of addresses being in profit, potentially incentivizing selling.

On-chain metrics, such as the Net Unrealized Profit/Loss (NUPL) ratio and the MVRV Z-Score, further bolstered the firm’s neutral outlook in the mid-term.

Positive Short-Term Outlook for BTC

However, Fidelity maintains a positive short-term outlook for Bitcoin, citing the absence of extreme indicators seen during bull market peaks. Price levels have remained above a “golden cross” on the Bitcoin chart, with the asset trading above its 50-day and 200-day moving averages throughout Q1, indicating bullish momentum.

Chris Kuiper, Fidelity’s director of research, commented that “on-chain indicators are now clearly above the lows or extreme bottoms previously observed.” The report also highlighted Bitcoin’s realized price, which was around $28,000 at the close of Q1, maintaining support since mid-January.

Accumulation of Bitcoin on the Rise

On-chain data showed continued accumulation by smaller investors, with a 20% increase in the number of addresses holding $1,000 or more worth of BTC since the start of the year, reaching new all-time highs. Exchange balances have declined as more investors moved to self-custody, reducing selling pressure.

Kuiper pointed out that the market is currently in the middle ground or halfway point of the market cycle, nowhere near historical extreme highs. He added that historically, a disproportionate amount of price gains occur in the latter half of the cycle.

Halving Event

Bitcoin has remained range-bound since the end of February, oscillating between $72,000 and $60,000. However, it has gained 5% since the weekend halving event, currently trading at a ten-day high of $66,863.

Fidelity’s shift in outlook reflects a cautious stance amidst changing market dynamics, emphasizing the need for vigilance and analysis in navigating the cryptocurrency landscape.

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