Key Points
The macroeconomic environment remains supportive, albeit at a slower pace: global M2 reached a record high of $13.44 trillion, and Bitcoin ETFs saw net inflows for the first time in 14 months. However, oil price pressures stemming from the Iran conflict pushed March CPI up to 3.3%, narrowing the Fed’s path for rate cuts.
On-chain metrics for Bitcoin are shifting from undervalued to early equilibrium: key on-chain indicators have exited the panic zone of Q1. At the current price of $70,500, this is approximately 13% below the average entry cost of long-term holders at $78,000. A breakout above this level would be a primary signal of a short-term trend reversal.
The $143,000 price target and 2x upside potential remain valid: based on a base case of $132,500, adjusted for -10% fundamentals and +20% macro factors.
Lowered from the Q1 target of $185,500, but the significant pullback in spot prices has actually expanded the potential upside from current levels.
Macroeconomic tailwinds remain, but momentum has slowed.
Since the release of the first-quarter report, Bitcoin has declined by approximately 27%, with an average price hovering around $70,500 in early April.
The conflict in Iran has introduced a new variable, but the overall macro environment remains favorable. What has changed is not the direction, but the pace.
Liquidity reached a record high but failed to effectively translate into Bitcoin.
As of February 2026, global M2 continued to expand to a historic high of nearly $13.44 trillion. However, Bitcoin declined by 27% compared to the first quarter. Liquidity and price are moving in opposite directions.
The source of liquidity explains this divergence. Over 60% of the M2 growth in the past year among the four major economies—China, the United States, the Eurozone, and Japan—came from China, driven by the People’s Bank of China’s reserve requirement ratio cuts and its formal shift toward a dovish stance in the first quarter.
The U.S. contribution was only 10%. The issue is that liquidity from China has limited channels to enter the Bitcoin market.
Domestic cryptocurrency trading restrictions remain in place, while indirect channels through Hong Kong and Singapore primarily serve institutional capital. Global liquidity is at a historical high, but the share actually reaching the Bitcoin market is shrinking.
The conflict in Iran is slowing the pace of the Fed's rate cuts.
Due to disrupted liquidity transmission from China, dollar liquidity remains the primary driver of Bitcoin. However, even this component has been slowed by the Iran conflict.
After the U.S. and Israel launched strikes against Iran on February 28, the Strait of Hormuz was blocked. Brent crude surged to $118 per barrel in mid-March, while Dubai crude hit a record high of $166 per barrel. This shock directly pushed up inflation: the U.S. March CPI rose from 2.4% in February to 3.3%, reaching a two-year high. As a result, the Fed’s room for rate cuts narrowed, and the March dot plot reduced the expected number of rate cuts in 2026 to just one.
Nevertheless, the direction toward easing has not changed. In mid-April, parts of the Strait of Hormuz reopened, causing oil prices to drop significantly to around $90. Core CPI remained stable at 2.6%, indicating that the shock has not yet fully spread throughout the broader economy.
President Trump formally nominated Kevin Warsh as the next Fed Chair at the end of January, and the Senate confirmation hearings are currently underway. Powell’s term ends on May 15, and a dovish stance is likely to continue. The number of rate cuts may decrease, but the overall direction will remain unchanged.
Institutional cash flow is beginning to reverse.
The institutional outflows that drove the first-quarter decline have begun to reverse. Bitcoin spot ETFs recorded their worst monthly outflows since their launch in November 2025 and experienced five consecutive months of net outflows. However, since March, monthly net inflows have turned positive. As of mid-April, the year-to-date net flow has become positive, and total assets under management have rebounded to $96.5 billion.
Corporate bitcoin accumulation is also accelerating. Strategy spent $2.54 billion in a single week (April 13–19) to purchase 34,164 bitcoins, increasing its total holdings to 815,061 BTC. However, the number of companies participating in this trend has not significantly increased.
Macroeconomic indicators lowered to +20%
Structural tailwinds remain intact: liquidity expansion, a policy easing bias, institutional capital flows returning to positive territory, and progress on the U.S. CLARITY Act. Recent headwinds—including oil shocks triggered by Iran and a slowdown in Fed rate cuts—have partially offset these tailwinds. Macroeconomic indicators for Q2 were revised down by 5 percentage points from Q1, adjusting to +20%.
Transitioning from undervalued to early equilibrium
On-chain metrics have exited the extreme fear zone and are transitioning toward the boundary of undervaluation and equilibrium. Key indicators such as MVRV-Z, NUPL, and aSOPR have moved out of the panic region seen in the first quarter and are entering an early recovery phase.
Although a significant rally during a panic zone rebound is unlikely, historical data shows that the average one-year return from this region has consistently remained in double digits. The risk-reward ratio remains at its most favorable position.
Notably, the average cost basis of short-term holders (STHs) is gradually declining.
This indicates that speculative capital is exiting, while new buyers are accumulating at lower prices. The timing aligns with the resumption of ETF net inflows and large-scale purchases by Strategy, supporting the view that institutional investors are steadily accumulating at a discount, thereby lowering their average entry cost.
The key risk level is $54,000, which represents the network-wide average cost basis. A break below this level would place the entire network in an unrealized loss position, acting as a bottom in extreme scenarios. The strongest resistance level is at $78,000, coinciding with the average entry cost of long-term holders.
The current price of $70,500 is approximately 13% below this resistance level, leaving a significant amount of short-term capital that entered recently in an unrealized loss position. A decisive breakout above $78,000 in the short term is worth close attention.
Surface growth, underlying stagnation
In the first half of April, Bitcoin's average daily trading volume reached 564,000 transactions, a 37.9% year-over-year increase. While the surface numbers look impressive, the details tell a different story.
The number of active addresses decreased to 428,000, a 13.2% year-over-year decline and a 4.2% quarter-over-quarter decline. The average transaction size fell to 1.19 BTC, down 34.1% from 1.80 BTC in the previous quarter. While the number of transactions increased, both participant activity and average transaction value declined.
This pattern reflects a small number of users repeatedly making small transfers, rather than broad economic use of the network. A significant portion of the transaction volume growth may stem from mechanical flows, such as deposits on trading platforms, and is unrelated to genuine growth.
The first-quarter report maintained fundamental metrics at 0%, based on expectations of BTCFi ecosystem expansion. Entering the second quarter, this argument has significantly weakened.
According to The Block’s “2026 Digital Assets Outlook,” Bitcoin L2 TVL has declined by 74% this year, while total BTCFi TVL has dropped by 10%, accounting for only 0.46% of Bitcoin’s total supply (91,332 BTC). Although individual protocols such as Babylon and Lombard have seen growth, the overall ecosystem has contracted.
Fundamental indicators lowered to -10%
Surface growth has failed to translate into genuine network expansion, and the underlying data supporting the BTCFi thesis has weakened. The balance of positive and negative signals seen in the first quarter has been disrupted. Second-quarter fundamental metrics have been revised downward from 0% to a baseline of -10%.
Target price: $143,000, with still 2x upside potential
Using the TVM method, the neutral baseline, calculated based on the average price in early April 2026, is $132,500. After applying a -10% fundamental adjustment and a +20% macroeconomic adjustment, the 12-month target price is set at $143,000.
This figure is approximately 23% below the Q1 target of $185,500. However, the actual upside potential has expanded further. Based on average prices, the upside space increased from +93% in Q1 to +103% in Q2.
The downward revision of the target price does not indicate pessimism. The macro trend and on-chain structure still support the long-term bull market thesis.
Three short-term observations:
· Decisively broke through the global medium-term equilibrium level at $78,000;
· ETFs continue to experience net inflows;
The Federal Reserve shifts its policy following a reduction in geopolitical risks.
If all three conditions are met, the $143,000 target remains achievable.