Fidelity Digital Assets, a leading issuer of spot Bitcoin ETFs in the US, has revised its medium-term outlook on Bitcoin from positive to neutral.
This shift, detailed in their Q1 2024 Signals Report released on April 22, stems from several concerning trends in Bitcoin’s market performance.
Why Fidelity Changed Its Bitcoin Medium-Term Stance?
The Fidelity Wise Origin Bitcoin Fund (FBTC) has seen impressive growth, amassing over $8 billion in inflows. It stands as the second-fastest growing Bitcoin ETF since its launch. Despite this success, recent analyses point to a significant shift in Bitcoin’s valuation outlook.
The Bitcoin Yardstick, or Hashrate Yardstick, serves as a key metric, similar to the Price-to-Earnings (PE) Ratio used in traditional stock markets. This ratio compares Bitcoin’s total market cap to its hash rate, which measures the computational energy securing the network.
“The idea is that the lower the ratio, the “cheaper” Bitcoin looks, just as a lower PE ratio can be interpreted as a “cheap” or undervalued stock,” Fidelity explained
According to the report, there was not a single day in Q1 when Bitcoin was deemed “cheap.” The cryptocurrency fluctuated between zero and two standard deviations from the mean for half of the quarter. Importantly, values above two deviations typically signal an overvaluation relative to the network’s energy output.
After reaching an all-time high of $73,777 on March 14, Bitcoin experienced a sharp correction, falling to $60,775 within a week. Since then, it has oscillated between $60,000 and $71,800. As of writing, it is trading around $66,000.
