Key Points
The macro environment remains supportive, although the pace has slowed: Global M2 hitting a new high of $13.44 trillion, Bitcoin ETF seeing net inflows for the first time in 14 months. However, the Iran conflict-induced oil shock has pushed March CPI to 3.3%, narrowing the Fed's rate cut path.
Bitcoin on-chain indicators are transitioning from undervalued to early equilibrium: Key on-chain indicators have moved out of the first-quarter panic zone. Current price is $70,500, with long-term holders' average entry cost of $78,000 down by approximately 13%. A breakthrough of this level would be a key signal for a short-term trend reversal.
The $143,000 target price and 2x upside remain valid: Based on a neutral benchmark of $132,500, overlaid with a -10% fundamental and +20% macro adjustment.
Revised down from the first-quarter target of $185,500, but the significant pullback in spot prices implies an expanded actual upside from current levels.
Macro Tailwinds Persist, but Momentum has Slowed
Since the first-quarter report, Bitcoin has dropped by around 27%, with the April average hovering around $70,500.
The Iran conflict introduced a new variable, but the overall macro environment remains favorable. The change is not in direction, but in speed.
Liquidity is at a record high, but has failed to effectively transmit to Bitcoin
As of February 2026, global M2 has continued to expand to nearly a historical high of $13.44 trillion. However, Bitcoin has fallen by 27% compared to the first quarter. Liquidity and prices are showing an inverse movement.
The sources of liquidity explain this divergence. In the past year, over 60% of M2 growth in the four major economies (China, US, Eurozone, Japan) has come from China, thanks to the People's Bank of China's reserve cut and the official shift to easing in the first quarter.
The U.S. contribution is only 10%. The issue lies in the limited channels through which liquidity from China enters the Bitcoin market.
Domestic restrictions on crypto trading still exist, and indirect channels through China's Hong Kong and Singapore mainly cater to institutional funds. Global liquidity is at a historical peak, but the share that can actually reach the Bitcoin market is shrinking.
Iran Conflict Slows Down Fed Rate Cut Pace
Due to blocked liquidity transmission from China, USD liquidity remains a key driving factor for Bitcoin. However, even this part has been delayed due to the Iran conflict.
Following the U.S. strike on Iran on February 28, the Strait of Hormuz was blocked. Brent crude oil surged to $118 per barrel in mid-March, with Dubai crude hitting a historic high of $166 per barrel. This impact directly pushed up inflation. U.S. March CPI rose from 2.4% in February to 3.3%, reaching a two-year high. The Fed's room for rate cuts narrowed as a result. The March dot plot reduced the expected rate cuts for 2026 to only once.
Nevertheless, the dovish direction remains unchanged. In mid-April, part of the Strait of Hormuz reopened, causing oil prices to plunge to around $90. Core CPI stabilized at 2.6%, indicating that the impact has not yet fully spread to the overall economy.
President Trump officially nominated Kevin Warsh as the next Fed Chair at the end of January, and Senate confirmation hearings are ongoing. Powell's term will end on May 15, and the probability of a dovish stance continuing is high. The number of rate cuts may decrease, but the direction will remain the same.
Institutional Fund Flows Begin to Reverse
The institutional outflows that drove the first-quarter decline have started to reverse. Bitcoin spot ETF recorded its worst monthly outflow since its launch in November 2025 and was in a net outflow state for five consecutive months. However, since March, monthly net inflows have turned positive. By mid-April, year-to-date cumulative fund flows turned positive, and total assets under management rose to $965 billion.
Corporate accumulation of BTC is also accelerating. Strategy spent $2.54 billion in a single week (April 13-19) to buy 34,164 BTC, increasing their total holdings to 815,061 BTC. However, the number of companies participating in this trend has not increased significantly.
Macro Indicator Revised Upward to +20%
Structural Tailwinds Still Intact: Liquidity expansion, leaning towards loose policies, institutional fund flows returning to normal, and progress on the U.S. CLARITY Act. Recent headwinds — the oil shock triggered by Iran and the Fed's interest rate cut slowdown — partially offset these positives. The second-quarter macro indicator was downgraded by 5 percentage points from the first quarter, adjusted to +20%.
Transition from Undervaluation to Early Equilibrium
On-chain indicators have moved out of the extreme fear zone, transitioning from undervaluation to the border of equilibrium. Key metrics such as MVRV-Z, NUPL, and aSOPR have departed from the panic zone of the first quarter and entered the early recovery phase.
Although a sharp rally from the panic zone rebound is unlikely, historical data shows that the average annual return rate starting from this zone has always remained in double digits. The risk-reward ratio at this point is still in the most favorable position.
It is worth noting that the average cost basis of short-term holders (STH) is gradually decreasing.
This indicates that speculative funds are exiting while new buyers are accumulating at lower price levels. The timing coincides with ETF net inflows restarting and a large-scale buy-in of Strategy, supporting the judgment that institutional investors are continuing to accumulate at a discount range to lower their average entry costs.
The key support level is $54,000, which is the network's average cost basis. If this level is breached, the entire network will enter an unrealized loss state, becoming the bottom of an extreme scenario. The strongest resistance level is at $78,000, aligning with long-term holders' average entry cost.
The current price of $70,500 is about 13% below this resistance level, causing a significant amount of recent short-term funds to be in an unrealized loss state. A decisive breakthrough above $78,000 in the short term is worth close attention.
Surface Growth, Underlying Stagnation
In the first half of April, the average daily Bitcoin transaction volume reached 564,000 transactions, a 37.9% year-on-year increase. The surface data is impressive, but the details tell another story.
During the same period, the number of active addresses decreased to 428,000, a 13.2% year-on-year decline and a 4.2% decrease from the previous month. The average single transfer size dropped to 1.19 BTC, a 34.1% decrease from 1.80 BTC in the previous quarter. While the number of transactions is increasing, participants and the value per transaction are both on the decline.
This pattern reflects a small number of users repeatedly making small transfers, rather than widespread economic use of the network. Much of the transaction volume growth may come from mechanical movements such as exchanges' deposits, unrelated to real adoption.
The first-quarter report will keep the fundamental indicator at 0%, based on the expected expansion of the BTCFi ecosystem. As we enter the second quarter, this argument has significantly weakened.
According to The Block's "2026 Digital Asset Outlook," Bitcoin's L2 TVL has already dropped by 74% year-to-date, BTCFi's total TVL is down by 10%, representing only 0.46% of the total Bitcoin supply (91,332 BTC). While individual protocols like Babylon and Lombard have seen some growth, the entire ecosystem has experienced a contraction.
Fundamental Indicator Adjusted to -10%
Surface-level growth has failed to translate into real network expansion, and the underlying data supporting the BTCFi argument has weakened. The balance between positive and negative signals that offset each other in the first quarter has been disrupted. The fundamental indicator for the second quarter has been adjusted from 0% to a bottom line of -10%.
Target Price of $143,000, Still Has 2x Upside Potential
Adopting the TVM method, the neutral benchmark calculated based on the average price in early April 2026 is $132,500. After adjustments for a fundamental -10% and macro +20%, the 12-month target price is set at $143,000.
This figure is about 23% lower than the first-quarter target of $185,500. However, the actual upside potential has increased. Calculated based on the average price, the upside has expanded from +93% in the first quarter to +103% in the second quarter.
A downward revision of the target price does not imply pessimism. The macro direction and on-chain structure still support the medium- to long-term bullish logic.
Three Short-Term Observations:
· Decisively break through the network's mid-term equilibrium point of $78,000;
· Continued net inflow of ETFs;
· Federal Reserve policy shift after geopolitical risks subside.
If these three conditions are met simultaneously, the $143,000 target is still achievable.
