Fidelity Digital Assets Downgrades Bitcoin's Medium-term Outlook to Neutral Amid Rising Sell Pressure
Summary:
Following Q1's indicators suggesting that Bitcoin is no longer a "bargain", Fidelity Digital Assets downgraded its Bitcoin (BTC) medium-term outlook from "positive" to "neutral". Key signals such as mounting sell pressure from long-term holders and 99% of Bitcoin addresses being in profit compounded this neutral view. Fidelity maintained a positive short-term outlook, indicating potential profit-making opportunities towards Q1 2024's close. Presently, Bitcoin trades around a ten-day high of $66,863.
In a recent report, Fidelity Digital Assets downgraded its medium-term perspective of Bitcoin (BTC) from "positive" to "neutral". This change of stance following the first quarter is due to several indicators implying that Bitcoin is starting to lose its perceived "bargain" status as sell pressure potentially mounts. As per Fidelity Digital Assets' latest Signals report issued on April 22, Bitcoin was evaluated using an analogous tool to stocks' Price-to-earnings ratio known as the Bitcoin Yardstick or Hashrate Yardstick. This gauge aims to establish whether Bitcoin is undervalued. Throughout the first quarter, the yardstick varied between negative one and zero divergences from the mean of 51%, implying that Bitcoin was deemed not cheap on any day of Q1, indicating a fair valuation. Coupled with the pressure from long-term holders to sell and the fact that 99% of addresses are profiting, which could spur selling, Fidelity changed its mid-term Bitcoin outlook to neutral. The Net Unrealized Profit/Loss (NUPL) ratio and the MVRV Z-Score, both on-chain metrics used to determine if BTC is inexpensive or pricey versus its actual worth, further substantiated this near-term neutral position. Despite this, Fidelity forecasts a promising short-term prospect for Bitcoin, indicating that brief profit-making opportunities could emerge at Q1 2024's close. However, it foresees no severe indicators usually seen at bull market points. Prolonged trading above Bitcoin chart's "golden cross" and above its 50-day and 200-day moving averages throughout Q1 demonstrate a bullish momentum, says the company. According to Chris Kuiper, Director of Research, on-chain metrics indicate clearer signs above the previously seen extreme lows or bottoms. The firm also relates to Bitcoin's realized price, targeting to record the average cost basis for existing coin possessors. At the close of Q1, the realized price was nearly $28,000, maintaining a support position since mid-January. Furthermore, on-chain data reflected a steady accruement by smaller investors, with the count of addresses with BTC worth $1,000 or more escalating by 20% since the start of the year and reaching new record highs. The firm noted a continued decline in exchange balances as more investors switch to self-custody, thus lowering sell pressure. Kuiper conveyed that we are far from the historically highest extremes, indicating we are at the market cycle's midpoint, where traditionally, a significant amount of price gains tend to occur in the second half of the cycle. Bitcoin's value has oscillated between $60,000 and $72,000 since the end of February. Notwithstanding, after its weekend halving, it has gained 5% and currently trades around a ten-day high of $66,863, as per Cointelegraph data.
Published At
4/23/2024 6:28:19 AM
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