• Fidelity Digital Assets revises Bitcoin’s medium-term outlook from positive to neutral, highlighting a lack of ‘cheap’ days in Q1 2024 as per their Bitcoin Yardstick.
• The report underscores increased sell pressure indicated by metrics such as the NUPL and MVRV Z-Score, influencing the adjustment to a neutral valuation of Bitcoin.
• Despite the neutral stance for the medium term, Fidelity remains optimistic in the short term, citing stable bullish indicators like sustained levels above Bitcoin’s moving averages.

Fidelity Digital Assets has updated its assessment of Bitcoin’s medium-term prospects, shifting its stance from “positive” to “neutral.” This revision follows the analysis in their latest Signals report, released on April 22. The report introduced the Bitcoin Yardstick—akin to the stock market’s price-to-earnings ratio—to evaluate Bitcoin’s market value.

The Bitcoin Yardstick is a metric that seeks to measure Bitcoin’s price-to-earnings ratio (P/E) by comparing the ratio of energy work done to secure the network to its market cap. Based on this metric, the report suggested that Bitcoin showed no days in the first quarter of 2024 when it was deemed “cheap,” thus reflecting a “fair value” trading status.

The report detailed that the adjustment to a neutral outlook is influenced by various metrics indicating an increase in sell pressure. It highlighted the behavior of long-term holders and the fact that 99% of Bitcoin addresses are currently in profit, potentially prompting more investors to sell. Furthermore, the Net Unrealized Profit/Loss (NUPL) ratio and the MVRV Z-Score—both indicators used to determine whether Bitcoin is over or under-valued—support the firm’s revised stance.

Despite the neutral medium-term outlook, Fidelity maintains a positive view in the short term, citing the absence of extreme market indicators that typically signify bull market peaks. The analysis noted that Bitcoin’s price remained above both its 50-day and 200-day moving averages throughout the first quarter, suggesting continued bullish momentum. 

Chris Kuiper, Fidelity’s director of research, confirmed in a post on X dated April 23 that the on-chain indicators are well above the “lows or extreme bottoms“ previously observed in the market. He added, “However, we are nowhere near the historical extreme highs.” 

Another key metric cited in the report was Bitcoin’s realized price, which stood at approximately $28,000 at the end of Q1 and has continued to act as a key support level since mid-January. The report also pointed to a significant uptick in smaller investor activity, with the number of addresses holding at least $1,000 in Bitcoin increasing by 20% since the start of the year and reaching new record highs.

In line with investor sentiment moving towards self-custody, exchange balances have declined, further diminishing potential sell pressure, as confirmed by recent Glassnode data. Kuiper also noted that the current market conditions suggest that Bitcoin is at a “middle-ground or halfway point” in its cycle, hinting at the potential for significant price increases in the latter stages of the market cycle.

According to CoinGecko, Bitcoin was trading at $66,344 at the time of publication. However, the flagship cryptocurrency was up 4.9% over the past week.