Macro environment remains supportive, albeit at a slower pace: Global M2 hits a new all-time high of $13.44 trillion, Bitcoin ETF flows turn net positive for the first time in 14 months. However, the oil shock triggered by the Iran conflict pushed March CPI to 3.3%, narrowing the Fed's rate cut path.
Bitcoin on-chain metrics are shifting from undervalued to early equilibrium: Key on-chain indicators have moved out of the Q1 panic zone. The current price of $70.5K is about 13% below the long-term holder average cost basis of $78K. Breaking above this level would be a key signal for a short-term trend reversal.
The $143K target price and 2x upside potential remain valid: Based on a neutral baseline of $132.5K, adjusted by -10% for fundamentals and +20% for macro factors.
This is a downward revision from the Q1 target of $185.5K, but the significant spot price correction means the actual upside potential from the current price level has actually increased.
Macro Tailwinds Persist, but Momentum Has Slowed
Since the release of the Q1 report, Bitcoin has fallen approximately 27%, with the average price hovering around $70.5K in early April.
The Iran conflict introduced a new variable, but the overall macro environment remains favorable. What changed is not the direction, but the speed.
Liquidity at record highs, yet ineffective transmission to Bitcoin
As of February 2026, global M2 continued to expand to near a record high of $13.44 trillion. Yet Bitcoin is down 27% from Q1. Liquidity and price are moving inversely.
The source of this liquidity explains the divergence. Over the past year, over 60% of M2 growth from the four major economies (China, US, Eurozone, Japan) came from China, benefiting from the PBoC's RRR cuts and its formal shift to an easing stance in Q1.
The US contribution was only 10%. The problem is that channels for China-sourced liquidity to enter the Bitcoin market are limited.
Domestic crypto trading restrictions remain, and indirect channels via Hong Kong and Singapore primarily serve institutional capital. Global liquidity is at historic peaks, but the share that can actually reach the Bitcoin market is shrinking.
Iran Conflict Slows Fed Rate Cut Pace
With transmission of China-sourced liquidity blocked, USD liquidity remains the primary driver for Bitcoin. But even this part has been delayed by the Iran conflict.
Following the US-Israel strike on Iran on February 28th, the Strait of Hormuz was blocked. Brent crude surged to $118/barrel by mid-March, and Dubai crude hit a record high of $166/barrel. This shock directly pushed inflation higher. US March CPI rose to 3.3% from 2.4% in February, a two-year high. The Fed's room for rate cuts subsequently narrowed. The March dot plot reduced 2026 rate cut expectations to just one.
Nevertheless, the direction of easing remains unchanged. By mid-April, the Strait of Hormuz partially reopened, and oil prices retreated significantly to around $90. Core CPI stabilized at 2.6%, indicating the shock hasn't broadly spread through the economy yet.
President Trump formally nominated Kevin Warsh as the next Fed Chair at the end of January, with Senate confirmation hearings ongoing. Powell's term ends May 15th, and an easing bias is highly likely to continue. The number of cuts may be reduced, but the direction remains.
Institutional flows begin to reverse
The institutional outflows that drove the Q1 decline have started to reverse. Bitcoin spot ETFs saw their worst monthly outflows since their November 2025 launch and were in net outflow for five consecutive months. However, since March, monthly net flows have turned positive. As of mid-April, year-to-date cumulative flows turned positive, with total AUM recovering to $96.5 billion.
Corporate accumulation is also accelerating. Strategy spent $2.54 billion buying 34,164 BTC in a single week (April 13-19), increasing its total holdings to 815,061 BTC. However, the number of companies participating in this trend has not increased significantly.
Macro indicator adjusted down to +20%
Structural tailwinds remain intact: liquidity expansion, policy easing bias, institutional flows back on track, and progress on the US CLARITY Act. Recent headwinds—the Iran-induced oil shock and slower Fed cuts—partly offset these positives. The Q2 macro indicator is adjusted down 5 percentage points from Q1 to +20%.
Shifting from Undervalued to Early Equilibrium
On-chain metrics have moved out of the extreme fear zone and are transitioning towards the border of undervaluation and equilibrium. Key metrics like MVRV-Z, NUPL, and aSOPR have exited the Q1 panic zone, entering an early recovery phase.
While a massive rally like those from panic zone rebounds is less probable, historical data shows that one-year average returns starting from this region consistently remain in double digits. The risk-reward ratio at this point remains in its most favorable position.
Notably, the average cost basis for Short-Term Holders (STH) is gradually declining.
This suggests speculative capital is exiting, while new buyers are accumulating at lower prices. The timing aligns with the restart of ETF net inflows and Strategy's large purchases, supporting the view that institutional investors are persistently accumulating at discounted prices, thereby pulling down the average entry cost.
A key risk level is $54K, the network's average cost basis. A break below this level would put the entire network in an unrealized loss state, forming a bottom in an extreme scenario. The strongest resistance is at $78K, coinciding with the long-term holder average cost basis.
The current price of $70.5K is about 13% below this resistance level, leaving a significant amount of recently entered short-term capital in unrealized loss. A decisive break above $78K in the short term is worth close attention.
Surface Growth, Underlying Stagnation
Bitcoin's average daily transaction count reached 564,000 in the first half of April, up 37.9% year-on-year. The surface data looks impressive, but the details tell another story.
Active addresses fell to 428,000 in the same period, down 13.2% YoY and 4.2% quarter-on-quarter. The average transaction size dropped to 1.19 BTC, down 34.1% from 1.80 BTC last quarter. Transaction count is rising, but both participants and value per transaction are falling.
This pattern reflects a small number of users repeatedly making small transfers, rather than broad economic utilization of the network. A significant portion of the transaction growth likely comes from mechanical flows like exchange deposits, unrelated to real growth.
The Q1 report maintained the fundamental indicator at 0%, based on expectations of BTCFi ecosystem expansion. Entering Q2, this thesis has clearly weakened.
According to The Block's "2026 Digital Asset Outlook," Bitcoin L2 TVL is down 74% year-to-date, and total BTCFi TVL has fallen 10%, representing only 0.46% of total Bitcoin supply (91,332 BTC). While individual protocols like Babylon and Lombard have seen growth, the overall ecosystem has contracted.
Fundamental indicator adjusted down to -10%
Surface growth has not translated into real network expansion, and the underlying data supporting the BTCFi thesis has weakened. The balance of offsetting positive and negative signals present in Q1 has been broken. The Q2 fundamental indicator is adjusted down from 0% to a baseline -10%.
Target Price $143K, Still 2x Upside Potential
Using the TVM method, the neutral baseline calculated from the early April 2026 average price is $132.5K. Applying the -10% fundamental and +20% macro adjustments yields a 12-month target price of $143K.
This figure is about 23% lower than the Q1 target of $185.5K. However, the actual upside potential has instead increased. Calculated from the average price, the upside expanded from +93% in Q1 to +103% in Q2.
The lower target price does not represent pessimism. The macro direction and on-chain structure still support a medium-to-long-term bull thesis.
Three short-term watch points:
· A decisive break above the network's mid-term equilibrium level of $78K;
· Sustained net inflows into ETFs;
· A Fed policy pivot following eased geopolitical risks.
If these three conditions materialize simultaneously, the $143K target remains achievable.
