Fidelity Digital Assets changed its view on Bitcoin (BTC) for the next phase from optimistic to neutral after the initial quarter. They based this decision on various indicators suggesting that Bitcoin is no longer seen as underpriced, potentially leading to increased selling pressure.
Fidelity Digital Assets recently published their Signals report on April 22nd, introducing the Bitcoin Valuation Tool, similar to the Price-to-Earnings ratio for stocks, which helps assess whether Bitcoin is currently underpriced.
In the initial quarter, Bitcoin’s value according to the Yardstick stayed within a range of -1% to 0% from the average of 51%, indicating that “there weren’t any days in Q1 when Bitcoin was deemed as underpriced.”
Fidelity expressed that the current Bitcoin price reflects a fair market value according to their assessment. They have updated their mid-term perspective on Bitcoin to neutral due to some indicators. Among these signs is the increasing sell pressure from long-term investors and the fact that almost all Bitcoin addresses are currently in profit, potentially leading to selling actions.
The NUPL ratio and MVRV Z-Score, two additional on-chain indicators, support the company’s assessment of a neutral stance for Bitcoin’s mid-term performance. The NUPL ratio helps determine whether gains or losses are predominantly unrealized, while the MVRV Z-Score measures the difference between Bitcoin’s current price and its realized value to evaluate if it is under or overvalued.
The investment company continues to hold an optimistic view towards Bitcoin’s short-term growth. They believe that investors might consider selling their Bitcoins for a profit near the end of Q1, 2024. However, they don’t see any extreme signs that typically appear during bull market summits.
During the first quarter, the company noted that the price of Bitcoin stayed above a significant level indicated by the “golden cross” on its chart. This meant that the asset was trading above both its short-term and long-term moving averages, suggesting a bullish trend.
According to Chris Kuiper, the firm’s research director, expressed in a recent X platform update on April 23rd, they now have faith that on-chain indicators have surpassed their previous lows or extremes.
The report mentioned Bitcoin’s “average buy-in price” which is represented by the realized price. This figure was approximately $28,000 at the end of Q1 and has held steady since mid-January.
Furthermore, smaller investors have been buying more Bitcoin on the blockchain, as evidenced by a 20% increase in the number of wallets holding over $1,000 worth of BTC since the start of the year, reaching new record levels.
The number of exchange balances has kept decreasing as more investors have shifted to self-custody. This has led to fewer sellers in the market, resulting in less pressure to sell.
Kuiper pointed out that “we haven’t reached the historic peak prices yet,” and further explained that “this puts us in a transitional phase or midway through the market cycle.”
“Historically, a disproportionate amount of price gains occur in the latter half of the cycle.”
Bitcoin’s price action has been confined between the resistance level at $72,000 and the support level at $60,000 since late February. Nevertheless, following the weekend’s halving event, Bitcoin has experienced a 5% surge, reaching a ten-day peak of $66,863 based on CryptoMoon’s data.
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2024-04-23 06:44