Fidelity Digital Assets, in its latest Signals report, has revised its medium-term outlook for Bitcoin from “positive” to “neutral.” This adjustment follows observations from the first quarter that suggest Bitcoin is no longer “cheap,” using analytical metrics comparable to the stock market’s price-to-earnings ratio. The Bitcoin Yardstick, or Hashrate Yardstick, indicated that Bitcoin did not hit low valuation points during this period, effectively trading at what Fidelity considers “fair value.”
On-Chain Metrics and Market Indicators
The revision stems from a combination of on-chain metrics and market behaviors that point to an increase in sell pressure. Notably, long-term holders are contributing to this pressure, and with 99% of Bitcoin addresses currently in profit, there is a heightened risk of selling. Metrics such as the Net Unrealized Profit/Loss (NUPL) ratio and the MVRV Z-Score, which help assess market value relative to “fair value,” also support a more cautious outlook.
Positive Short-Term Prospects Amid Neutral Medium-Term Stance
Despite the neutral medium-term perspective, Fidelity maintains a positive short-term outlook for Bitcoin. The firm notes that there are opportunities for short-term profit-taking, especially as Bitcoin remained above its 50-day and 200-day moving averages throughout the first quarter, a pattern typically associated with bullish momentum. This suggests that while immediate prospects look favorable, caution is advised looking further ahead.
Market Dynamics and Investor Behavior
Further reinforcing Fidelity’s analysis, on-chain data has shown continuous accumulation by smaller investors, with significant growth in the number of addresses holding at least $1,000 worth of Bitcoin. Additionally, a decline in Bitcoin held on exchanges hints at a trend towards self-custody, potentially mitigating some selling pressure.
A Balanced Market View
Chris Kuiper, Fidelity’s director of research, emphasized that the market is currently at a “halfway point” in its cycle, historically characterized by significant price gains in the latter stages. Bitcoin’s price movement has been range-bound with recent gains following the halving event, supporting a cautious but not pessimistic outlook.
