Research Study

Q4 2023 Signals Report

A quarterly breakdown of key market metrics that could be impacting price and investor sentiment

by Fidelity Digital Assets

As of the end of Q4 2023, the data suggests an overall positive outlook for both bitcoin and ether in the short- and long-term.

Bitcoin ended 2023 up 154% and has broken back above many short- and long-term indicators at the time of writing. The high fee environment promises increased revenue that miners are taking advantage of as they prepare for the next Bitcoin Halving, an event that is expected to programmatically occur in April 2024 and will reduce the block subsidy by half.

We also continue to see bitcoin leaving exchanges as the market approaches a 30% reduction from the exchange supply peak in 2020. The reduction in supply on exchanges will be a key metric to watch in 2024 and highlights the importance of other custody options, such as self-custody, or the use of a regulated third-party custodian, such as Fidelity Digital Assets℠.

Ether, up roughly 90% year-to-date, has also seen short-term positive price signals and growing on-chain metrics. The network continues to maintain a higher rate of burn than issuance, resulting in nearly 311,000 ether being removed from the network since The Merge’s implementation in September 2022. However, we have seen a significant slowing of ether being staked over the past quarter that may signal we are approaching a “terminal” staking percentage.

Uptake of Layer 2 platforms in 2023 was remarkable and is the first clear signal that Ethereum’s rollup-centric roadmap could be successful in years to come. The next upgrade, occurring in early 2024, could further accelerate adoption of Layer 2 platforms by substantially lowering fees for users.

Overall, the slowing growth of staked ether, adoption of Layer 2’s, and sustained base layer usage all point to a healthy Ethereum ecosystem in 2024.

Read more to learn what metrics we are watching and what they may be telling us.

The information herein was prepared by Fidelity Digital Asset Services, LLC (“FDAS LLC”) and Fidelity Digital Assets, Ltd (“FDA LTD”). It is for informational purposes only and is not intended to constitute a recommendation, investment advice of any kind, or an offer or the solicitation of an offer to buy or sell securities or other assets. Please perform your own research and consult a qualified advisor to see if digital assets are an appropriate investment option.

Custody and trading of digital assets are provided by Fidelity Digital Asset Services, LLC, a limited liability trust company chartered by the New York Department of Financial Services (NMLS ID 1773897). FDA LTD relies on FDAS LLC for these services. FDA LTD is registered with the Financial Conduct Authority under the U.K.’s Money Laundering Regulations. The Financial Ombudsman Service and the Financial Services Compensation Scheme do not apply to the cryptoasset activities carried on by FDA LTD.

To the extent this communication constitutes a financial promotion in the U.K., it is issued only to, or directed only at, persons who are: (i) investment professionals within the meaning of Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "FPO"); (ii) high net worth companies and certain other entities falling within Article 49 of the FPO; and (iii) any other persons to whom it may lawfully be communicated.

This information is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. Persons accessing this information are required to inform themselves about and observe such restrictions.

Digital assets are speculative and highly volatile, can become illiquid at any time, and are for investors with a high-risk tolerance. Investors in digital assets could lose the entire value of their investment.

FDAS LLC and FDA LTD . do not provide tax, legal, investment, or accounting advice. This material is not intended to provide, and should not be relied on, for tax, legal, or accounting advice. Tax laws and regulations are complex and subject to change. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.

Views expressed are as of the date indicated, based on the information available at that time, and may change based on market or other conditions. Unless otherwise noted, the opinions provided are those of the speaker or author and not necessarily those of Fidelity Digital Assets or its affiliates. Fidelity Digital Assets does not assume any duty to update any of the information.

Past performance is no guarantee of future results. Investment results cannot be predicted or projected.

Fidelity Digital Assets and the Fidelity Digital Assets logo are service marks of FMR LLC

© 2024 FMR LLC. All rights reserved.

1127996.1.0