According to a report by Cointelegraph, Fidelity’s digital asset investment department, Fidelity Digital Assets, maintained a positive short-term outlook on Bitcoin after the first quarter, but adjusted the mid-term outlook (1 to 5 years) from “positive” to “neutral” based on several indicators.
In a report released on April 22nd, Fidelity cited several on-chain indicators indicating that Bitcoin is no longer considered “cheap” as potential selling pressure gradually increases, including a “Bitcoin Yardstick” used to measure whether the Bitcoin price is undervalued. This indicator is similar to the concept of the price-to-earnings ratio for stocks, calculated by dividing the total market value of Bitcoin by the hash rate, and standardizing the data over the past two years. The lower the reading of the Bitcoin Yardstick, the relatively cheaper Bitcoin is considered.
Fidelity noted that during 51% of the first quarter, the Bitcoin Yardstick value remained between 1 standard deviation below the average to the average, indicating that “Bitcoin was not considered ‘cheap’ on any day in the first quarter, and the value fluctuated between 0 and 2 for the other 50% of the time.” Fidelity stated that this data indicates Bitcoin is currently trading at “fair value.”
Supporting Fidelity’s adjustment of the mid-term outlook were indicators showing that long-term holders are increasing selling pressure, and 99% of Bitcoin addresses are in a profitable state, which may lead holders to sell. Changes in indicators observed by Fidelity also included the unrealized net profit/loss (NUPL) ratio rising to the “belief” range, and the market value to realized value ratio (MVRV Z-Score) reading fluctuating between undervaluation and overvaluation.
Short-term outlook remains positive
Fidelity Digital Assets maintains a “positive” short-term outlook on Bitcoin, stating in the report that there is a possibility of short-term profit taking at the end of the first quarter of 2024, but extreme indicators common in bull market peaks have not yet appeared.
Fidelity noted that the price levels on the Bitcoin chart remained above the “golden cross,” trading above the 50-day and 200-day moving averages throughout the first quarter, indicating a bullish trend. The report also mentioned the realized price of Bitcoin, which aims to reflect the average cost basis of all current holders. At the end of the first quarter, the realized price of Bitcoin was around $28,000, maintaining support since mid-January.
Chris Kuiper, research director at Fidelity Digital Assets, stated on the X platform:
On the other hand, Fidelity Digital Assets maintains a “positive” short-term outlook and a “neutral” mid-term outlook for Ethereum. The report noted that since the implementation of the merge upgrade in September 2022, the Ethereum network has continued to maintain a burn rate higher than issuance, resulting in the removal of nearly 311,000 ETH from the network. However, the pace of ETH being staked has significantly slowed down in the past quarter, “which may indicate that we are approaching a ‘terminal’ staking percentage.”