Fidelity warns of increased selling pressure on Bitcoin

Fidelity Digital Assets, the leading issuer of the Bitcoin Spot ETF in the US, has revised its medium-term outlook on Bitcoin from positive to neutral.

This change, detailed in their Q1/2024 Signals Report published on April 22, stems from several trends related to Bitcoin 's market performance.

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Why did Fidelity change its medium-term stance on Bitcoin?

The Fidelity Wise Origin Bitcoin Fund (FBTC) has seen impressive growth, amassing over $8 billion in Capital. This is the second fastest growing Bitcoin ETF since launch. Despite this success, recent analyzes point to a significant change in their Bitcoin valuation outlook.

The Bitcoin Yardstick, or Hashrate Yardstick, Vai as a key metric, similar to the Price-to-Earnings (PE) Ratio used in traditional stock markets. This ratio compares Bitcoin's total market Capital to its Hash Rate , which measures the computational power securing the network.

The idea is that the lower the ratio, the “cheaper” Bitcoin is, just as a lower PE ratio can be interpreted as a “cheap” or undervalued stock.

Fidelity explains .

According to the report, there was not a single day in Q1 when Bitcoin was considered “cheap.” The leading cryptocurrency fluctuated between zero and two standard deviations from the Medium for half the quarter. Importantly, values ​​above two deviations typically signal an overvaluation of the network's energy output.

This somewhat neutral outlook is further supported by increased selling pressure from long-term holders and a high percentage of profitable addresses. Both of these could encourage selling.

We believe that on-chain indicators are currently above the previously observed extreme lows or Dip . However, we have not yet reached the highest level in history.

said Chris Kuiper, Director of Research at Fidelity Digital Assets.

Also Read: BlackRock's Bitcoin ETF has accumulated nearly 70 consecutive days

However, Fidelity's view is not entirely conservative from start to finish. The company maintains a positive short-term stance, following profit-taking activities at the end of Q1. Furthermore, on-chain data shows continued accumulation by smaller investors. The number of addresses holding at least $1,000 worth of Bitcoin has increased 20% since the beginning of the year, reaching a new All-Time-High .

This shows the continued growth of small addresses accumulating and saving Bitcoin, even as prices rise. This may also represent the growing distribution of Bitcoin and its adoption among “Medium” people.

Fidelity notes.

In addition, the BTC balance on the exchange has also decreased as many investors choose to self-custody. This may reduce selling pressure. After reaching an All-Time-High of $73,777 on March 14, Bitcoin underwent a sharp correction , falling to $60,775 within a week. Since then, it has fluctuated between $60,000 and $71,800. As BeInCrypto writes this, it is trading around $66,000.

Also Read: Top 8 best Bitcoin platforms and exchanges in 2024