Fidelity Digital Assets No Longer Considers Bitcoin to Be Inexpensive
Fidelity Digital Assets has revised its medium-term forecast for Bitcoin (BTC) from “positive” to “neutral,” according to its recent Signals report released on April 22. This adjustment comes after a reevaluation of Bitcoin’s valuation in the first quarter, which indicated a shift in its value.
Bitcoin, which was previously considered affordable, is now facing potential selling pressures, making it less appealing at its current prices. The report emphasizes the use of the Bitcoin Yardstick, also known as the Hashrate Yardstick, which is a tool used to determine whether Bitcoin is undervalued, similar to the price-to-earnings ratio used in stock evaluations.
During the first quarter, the Yardstick showed that Bitcoin fluctuated between a negative one and zero deviations from its mean of 51%, indicating that there were no days when Bitcoin was considered “cheap.” As a result, Fidelity now sees Bitcoin as trading at “fair value” and has adjusted its medium-term outlook for the cryptocurrency to neutral.
This revised stance is supported by several factors, including increased selling pressure from long-term holders and the fact that 99% of Bitcoin addresses are currently in profit, which may lead to selling. Other on-chain indicators such as the Net Unrealized Profit/Loss (NUPL) ratio and the MVRV Z-Score, which assess whether Bitcoin is overvalued or undervalued relative to its “fair value,” also contribute to this neutral assessment.
Despite the neutral medium-term forecast, Fidelity maintains a positive outlook for the short term. The firm acknowledges the potential for short-term profit-taking as the first quarter concludes but notes the absence of extreme indicators typically associated with the peak of a bull market.
Throughout the first quarter, Bitcoin showed bullish momentum as its price consistently traded above its 50-day and 200-day moving averages, a pattern known as a “golden cross” on its chart. Chris Kuiper, the director of research at Fidelity, expressed a positive outlook in a post on X on April 23, stating that on-chain indicators had significantly increased from previous lows or extreme bottoms.
The report also highlights Bitcoin’s realized price, which estimates the average cost basis for all current Bitcoin holders. As of the end of the first quarter, the realized price was around $28,000, acting as a strong support level since mid-January.
Further data shows that smaller investors have been accumulating Bitcoin, with the number of addresses holding Bitcoin valued at $1,000 or more increasing by 20% since the beginning of the year, reaching new all-time highs.
The report also notes a decrease in exchange balances as more investors choose self-custody, which reduces selling pressure.
Kuiper clarifies that the market is not yet approaching historical extreme highs and is currently positioned in the midpoint of the market cycle. He highlights that historically, most price gains occur in the latter half of these cycles.
After trading within a range between $72,000 and $60,000 since late February, Bitcoin has recently experienced a slight increase. Following the halving event over the weekend, it reached a ten-day high of $66,863, according to the latest data from CoinGecko.
