Fidelity Digital Assets Research said in its latest Q3 Signals Report that the current crypto bear market is still in a bottoming phase. The firm highlighted a set of reference points: market-cap-weighted NUPL fell to -0.01, Bitcoin dominance rose to 68%, and several indicators moved close to historical capitulation ranges. Using the roughly 300-day bottoming periods seen in 2018 and 2022 as reference points, Fidelity said the current drawdown, now about 203 days old, may be roughly two-thirds complete. The report said October 2026 is a time window worth watching, but it does not amount to a prediction that the market will bottom then.
Market overview: BTC is still carrying the broader mix
Fidelity’s dashboard for the three assets shows that weighted NUPL is being driven largely by Bitcoin because BTC’s market capitalization is far larger than that of ETH and SOL.
At the moment, BTC is the only one of the three still showing unrealized profit, while ETH and SOL are both sitting in unrealized loss territory. The combined weighted NUPL reading of -0.01 puts the market slightly below break-even. In other words, the unrealized profit still left in the system is concentrated mostly in Bitcoin rather than spread across the asset class.
Fidelity said BTC is acting as a stabilizer in the current structure, offsetting part of the pressure coming from losses in ETH and SOL, though not enough to bring the aggregate figure back above zero. If the three assets carried equal weights, the overall picture would look weaker because ETH and SOL are deeper in loss.
That, in Fidelity’s view, reinforces Bitcoin’s role as the market’s anchor asset. ETH and SOL have continued to weaken against BTC, showing that investors still prefer the largest and most liquid digital asset while staying cautious on assets with a history of larger swings. The report said the market looks more like it is searching for a floor during a repair phase than moving into a broad-based profit stage at the end of a cycle.
By the second quarter of 2026, BTC’s own NUPL had moved lower again and the weighted NUPL for the three-asset basket had slipped to -0.01. Until more assets move back into unrealized profit, Fidelity said the market is more likely to stay range-bound or remain under pressure than quickly return to broad expansion.
Bitcoin dominance rises to 68% as rotation remains limited
After falling through the second half of 2025, Bitcoin dominance has started to climb again at a slow pace, and Fidelity said the longer-term uptrend has not been broken. Historically, rising BTC dominance has tended to coincide with other digital assets lagging Bitcoin, a pattern that usually points to capital favoring the deepest and most mature market during periods of uncertainty and valuation stress.
The report said the rising series of local lows in BTC dominance, together with a relatively steady upward slope, suggests that this preference is not a short-lived move. At 68%, the current reading shows that capital is still concentrated in Bitcoin and that risk appetite remains selective. Participation outside BTC is limited, and the broader market has not regained widespread relative strength.
Fidelity added that if BTC dominance begins to fall or flatten in the third quarter, that could indicate improving risk appetite and renewed attention on other digital assets. It may also serve as an early sign that market structure is beginning to shift.
All three assets are down, while spot ETP flows remain negative
On a rolling one-year basis, BTC is down about 45%, ETH is down 37%, and SOL is down 53%. Year to date, the three assets have also weakened sharply, with BTC down 33%, ETH down 47%, and SOL down 41%. By the end of the second quarter, BTC had fallen below its 200-week moving average, and Fidelity described sentiment across the digital-asset market as extremely depressed.
The report linked the scale of the decline to several overlapping factors: an unfavorable macro backdrop, capital moving toward AI-related investments and equities, and fading market momentum. Fidelity said a number of indicators are now near or already inside historical capitulation ranges.
Spot ETP flows have also stayed negative. Since the start of 2026, cumulative net outflows from spot ETPs reached $5.4 billion, including $4.9 billion in the second quarter alone. June by itself saw roughly $4.5 billion in net outflows, the worst month since spot Bitcoin ETPs were launched.
From June 1 to June 4, the market also went through a liquidation cascade approaching $6 billion. Fidelity said forced unwinds added selling pressure and disrupted positioning across the market.
The macro and geopolitical backdrop remained another drag. Inflation stayed elevated, energy prices remained under pressure, and market expectations for monetary policy shifted sharply. At the start of the year, the market still thought 2026 might bring no rate cuts; by the end of the second quarter, expectations had swung to the possibility of a rate hike by year-end. Short-term volatility is still high, Fidelity said, and market bottoms usually take time to form.
At the same time, the report said current valuation levels and the increasingly visible negative correlation between digital assets and traditional risk assets may offer attractive entry levels for long-term investors, provided that adoption of the underlying networks continues to strengthen.
Bitcoin: NUPL at 0.09, but momentum is still weak
NUPL: Positive
At the end of the second quarter, BTC’s NUPL stood at 0.09, placing it in the “hope-fear” zone. Fidelity said that means the market still carries a small amount of unrealized profit, but investor sentiment has turned more cautious. Some holders remain in profit, yet the market is still far from a broad consensus that a bottom is already in place.
BTC fell 14% in the second quarter, while NUPL declined from 0.21 to 0.09, a drop of 0.12. Fidelity characterized that move as a moderate compression in unrealized profit rather than large-scale capitulation. Based on current data, BTC is trading about 10% above the network’s aggregate cost basis, leaving investors with about $108 billion in unrealized profit in total.
For much of April and May, BTC’s NUPL sat in the “optimism-anxiety” zone, when the market was gradually becoming more willing to believe a bottom might have formed. The recent move back into “hope-fear” points to sentiment shifting from sustained optimism toward caution and uncertainty. Fidelity noted that in past bear markets, BTC’s NUPL has fallen deeper into capitulation territory, so the current reading still calls for restraint.
Historically, when BTC’s NUPL has been within 0.05 of 0.09, the median return over the following year was 53%, and the three-year annualized compound growth rate was 69%, based on 73 observations. The correlation between NUPL and future one-year and three-year returns was -0.26 and -0.80, respectively. Fidelity said that is why it treats lower NUPL readings as a positive signal, while also warning that the historical relationship may weaken or fail and should be read alongside macro conditions and overall market structure.
Momentum signal: Negative
BTC’s momentum indicator suggests the current downtrend has produced a bearish impulse, with price failing to keep making higher highs over the past quarter. The signal turned positive on April 21, 2026, when BTC was at $78,317 and both short-term volatility and price momentum had moved above their medium-term averages.
That rebound did not last. On June 1, the signal turned negative again with BTC at $66,540, indicating that momentum had faded and price was unable to hold. During the second quarter, BTC traded between $58,500 and $82,256, with especially sharp swings in April and May. Fidelity said the model produced one false positive this quarter, as the early-quarter move looked durable at first before reversing quickly.
Since the signal turned negative on June 1, BTC has fallen another roughly 10% and remains in a negative momentum regime. Short-term realized volatility is about 34% annualized, below the 40% medium-term figure. For the signal to flip positive again, either short-term volatility would need to rise moderately or medium-term volatility would need to fall further. Fidelity stressed that the indicator is not meant to call exact tops or bottoms but to identify phases when price direction and volatility are moving together. The current reading still points to caution.
Yardstick: Positive
BTC is down more than 50% from its historical peak, while network hash rate has fallen only about 22% from its high. Miners are under pressure, but the network is still showing resilience. As a result, Fidelity said Bitcoin Yardstick is close to historical lows, implying that BTC may be trading at a significant discount relative to the amount of hash power securing the network.
The firm also said this cycle differs in some respects from earlier ones, including lower price volatility and a more mature mining industry. Since BTC price is a direct input into Yardstick, lower price volatility makes hash rate more influential in the ratio. Mining companies have also improved their ability to manage energy costs and operating efficiency, giving them more flexibility to adjust uptime, move machines, or optimize power contracts.
Price weakness and falling hash rate have together pushed Yardstick into what Fidelity calls an undervalued zone. Over the past 92 days, the indicator spent 76 days, or about 83% of the time, more than one standard deviation below its long-term mean. Historically, that area has tended to line up with accumulation phases or relative bottoms. In 2018, Yardstick stayed in a similar range for 298 days; in 2022, it remained there for 299 days before sentiment gradually improved. This bear market has lasted about 203 days so far. For investors focused on cycle timing, Fidelity said October 2026 is a window worth monitoring, though not a guaranteed bottom.
Relative performance versus gold: Negative
One of the core investment cases for BTC is its potential role as a store of value. Measuring Bitcoin against gold, Fidelity said, offers a way to judge it against a traditional physical safe-haven asset rather than just against fiat currency.
The report said recent price volatility does weaken Bitcoin’s store-of-value narrative in the short run, but not enough to invalidate the longer-term thesis. In the second quarter of 2026, BTC fell 14% in U.S. dollar terms, yet its price relative to gold was basically unchanged. After roughly a year of underperformance, investor preference between BTC and gold may be moving back toward balance. Since Feb. 28, BTC has gained 15% against gold.
Fidelity also noted that gold’s strong performance over the past year was driven in large part by sustained buying from central banks. In that setting, the relative relationship between BTC and gold may be settling into a more stable balance. At the same time, on-chain indicators still point to an accumulation phase, with some already showing capitulation-type characteristics. For long-term allocators, Fidelity said BTC’s prior underperformance against gold may make today’s valuation more attractive.
Hash rate: Negative
BTC’s daily average hash rate and 30-day average hash rate are still below the 1,000 EH/s, or 1 ZH/s, milestone reached in September 2025. Fidelity pointed to two main reasons: rising demand from AI and high-performance computing businesses for power, land and data-center capacity, and shrinking mining margins during the bear market.
Some mining companies may be redirecting power capacity, data-center infrastructure and new capital spending toward AI or high-performance computing. With BTC prices under pressure, AI compute contracts can provide steadier and more predictable revenue, making the reallocation economically rational. Fidelity added that Bitcoin ASICs are highly specialized machines that typically cannot be repurposed directly for AI workloads, so the shift toward AI is more about redeploying power, land, buildings and cooling infrastructure than converting existing miners into AI servers.
Since BTC peaked in October 2025, hash rate has kept declining, while mining difficulty has stayed high and did not fall in step with price. Lower prices and compressed margins have pushed miners operating near break-even to shut down. Fidelity said bear-market deterioration in mining economics has led to temporary hash-rate declines in previous cycles too, but competition from AI data centers and power contracts may keep this decline going longer than the historical average.
In the second quarter, daily average hash rate rose 8% quarter over quarter, but the 30-day average fell 6% over the same period. Since the start of 2026, BTC is down more than 29%, while hash rate has slipped only about 12%, suggesting that miner economics are under pressure but the network remains relatively resilient overall.
Ethereum: NUPL falls to -0.43, while stablecoin transfers stay strong
NUPL: Positive
ETH’s NUPL moved deeper into capitulation territory in the second quarter, showing further deterioration in sentiment. ETH fell 25% during the quarter, while NUPL dropped from -0.12 to -0.43, a decline of 0.31 that points to significantly larger unrealized losses for holders. Based on current data, ETH is trading about 30% below the network’s aggregate cost basis, with unrealized losses totaling roughly $87 billion.
On June 6, ETH’s NUPL hit a local low of -0.46 and has not moved below that level since. Fidelity said the indicator could still print new lows, but the fact that this level has held for now may make it a point worth watching for long-term investors.
Historically, when ETH’s NUPL has been within 0.05 of -0.43, forward returns have usually been strong. Since 2018, the median one-year return for similar readings was 70%, and the three-year annualized compound growth rate was 133%, with 90 observations for each horizon. The correlation between NUPL and future one-year and three-year returns was -0.13 and -0.81, respectively. Fidelity said that is the basis for classifying low NUPL as a positive signal, though it again warned that historical patterns can weaken or break down.
Momentum signal: Negative
ETH’s momentum signal turned positive on April 16, 2026, when the asset was at $2,350 and both volatility and price momentum were above their medium-term averages. The move did not hold. On May 17, the signal turned negative again as price fell back to $2,130.
ETH traded between $1,564 and $2,422 during the second quarter, with especially sharp moves in April and May. Like BTC, ETH’s momentum model also generated one false positive during the quarter. Since the May 17 turn back to negative, ETH has fallen another roughly 25% and remains in negative momentum territory. Short-term realized volatility is about 50% annualized, well below the 71% medium-term reading. A positive reversal would require either a marked rise in short-term volatility or a large decline in medium-term volatility. Fidelity said the indicator still reflects simultaneous weakness in both price and volatility conditions.
Usage metrics: Neutral
Fundamentals on Ethereum’s base layer cooled in the second quarter, broadly in line with ETH’s falling price and declining volatility. Total transaction count still showed some resilience, slipping only 5% during the quarter, with daily transaction volume remaining above 2 million throughout.
Transaction fees stayed far below historical averages, though they were still sensitive to short-term changes in demand. Median transaction fees briefly rose to $0.42 on April 22 before falling steadily to around $0.02 by quarter-end. After hitting record highs in the previous quarter, active addresses and new addresses dropped 10% and 31%, respectively. Fidelity said on-chain activity and asset price still appear closely linked.
The share of addresses tied to real economic activity edged higher in the quarter, though a meaningful portion still did not materially contribute to Ethereum’s revenue or security. Fidelity said this pattern may continue through 2026. The planned Glamsterdam upgrade will focus on raising base-layer capacity, which could add more block space supply later on.
Stablecoin transfer volume: Positive
With scaling progress and a more favorable regulatory environment, stablecoin transfer volume on Ethereum has risen above historical averages. Over the past 12 months, total stablecoin transfer volume kept reaching new highs and has now exceeded $20 trillion in cumulative terms. Growth, however, has started to slow, with average daily transfer volume in June running about 9% below the prior three-month period.
Fidelity said stablecoin usage on Ethereum is still expanding even as the broader digital-asset market weakens. That suggests real demand is becoming less tied to market sentiment and asset prices, and more tied to payments, settlement and access to on-chain dollars globally rather than speculative trading alone. The average cost of a stablecoin transfer has remained below $1 for three straight quarters, which Fidelity said also confirms the impact of prior scaling measures.
Network fees: Negative
Ethereum network fees have continued to decline over the past year. In the second quarter, rolling 12-month fees fell 15%, from $344 million to $294 million. Fidelity said protocol and infrastructure scaling has been expanding faster than demand for block space, and with developers refocusing on base-layer scaling, that trend may have a long runway.
The upcoming Glamsterdam upgrade is expected to expand block space capacity further, which could keep fee pressure to the downside over the next year. During the second quarter, daily Ethereum network fees ranged from $145,000 to $2.75 million, with an average of about $575,000 a day. Fidelity said one of the key issues for investors over the next few years will be how core developers balance network growth with value capture. Unless developers and researchers devote more effort to improving value capture, network fees and protocol revenue may stay under pressure.
Solana: NUPL at -0.72, with on-chain activity showing resilience
NUPL: Positive
SOL’s NUPL stayed in capitulation territory throughout the second quarter. SOL fell 12% during the period, while NUPL slipped from -0.67 to -0.72, extending unrealized losses. Based on current data, SOL is trading about 41% below the network’s aggregate cost basis, with total unrealized losses around $29 billion.
On June 6, SOL’s NUPL rebounded sharply from a local low of -1.08, another sign of the asset’s higher volatility in this bear market. Fidelity said that recovery off the low may indicate that a significant share of earlier holders has already sold while new buyers have begun stepping in at lower prices.
Historically, SOL has rarely traded with NUPL within 0.05 of -0.72, but when it has, subsequent performance has been strong. Since the Solana network launched, there have been 21 such observations, with a median one-year forward return of 542%. Fidelity said there is not enough history yet to produce a reliable three-year return figure. The correlation between SOL’s current NUPL and future one-year returns is -0.56, but the firm stressed that Solana’s shorter operating history and limited sample size call for caution.
Momentum signal: Negative
SOL’s momentum signal has remained negative since Oct. 28, 2025, with price and volatility broadly moving lower together. Even so, SOL’s short-term realized volatility has recently risen above its medium-term volatility, at about 63.5% and 61% annualized, respectively. Fidelity said that setup has at times appeared around momentum reversals. If price strength were to confirm, it would provide stronger support for a developing floor.
Unlike BTC and ETH, SOL did not produce a false positive momentum signal this quarter. For most of the second quarter, it traded between $63 and $97, starting the quarter around $81. Under Solana’s own model parameters, even the move to $97 was not enough to turn the signal positive, and the asset later made a lower low. When the signal first turned negative on Oct. 28, 2025, SOL was around $194. It has since fallen about 60%, and Fidelity said the adjustment still does not appear complete. The current reading looks closer to a stabilization attempt than a restored uptrend.
Usage metrics: Positive
Despite the bear market, Solana’s fundamentals have remained relatively resilient. Asset prices have weakened, but demand for on-chain activity has not contracted in the same way. Monthly transaction count kept rising, up 1% quarter over quarter, and may still be on track for a record high.
User growth lagged the increase in network activity, which means average transactions per user are rising. In the second quarter, monthly active addresses and new addresses fell 15% and 7%, respectively, while addresses tied to real economic activity declined only 4%. Fidelity said economically meaningful on-chain activity has remained relatively steady in the current market, setting Solana apart to some extent from Ethereum.
Another point in Solana’s favor is stable transaction cost. Throughout the quarter, median transaction fees stayed below 0.1 cent with little variation, giving users and investors a relatively predictable cost structure.
Stablecoin transfer volume: Positive
Stablecoin transfer volume on Solana has historically been volatile, but the longer-term uptrend has remained intact since activity stepped up more than a year ago. Daily average stablecoin transfer volume now holds above $8.4 billion, up 17% from the previous quarter. Compared with Ethereum, the average size of each stablecoin transfer on Solana is smaller, reflecting differences in user mix and use cases across the two networks.
Over the past 12 months, Solana has processed more than $2.6 trillion in stablecoin transfers. Even as SOL has fallen sharply, stablecoin activity and broader on-chain usage have stayed firm. Fidelity said, as on Ethereum, a meaningful portion of stablecoin demand on Solana appears sticky and less tied to short-term market swings. If on-chain activity keeps growing, the network’s stablecoin ecosystem may expand alongside it. In the second quarter, the total stablecoin market shrank about 1.3%, while stablecoin supply on Solana rose about 3%, an increase of about $300 million.
Network fees: Neutral
Solana’s network fees are still trending lower, but the report said they are beginning to show signs of finding an equilibrium. In the second quarter, rolling 12-month network fees fell 18% to $221 million, with daily average fee revenue of about $390,000. If second-quarter fees are annualized, revenue comes to about $141 million, bringing the gap with the rolling 12-month figure down materially.
At the same time, Solana’s on-chain activity is still rising, and several Solana Improvement Documents, or SIMD proposals, are paying more attention to value capture for SOL holders. Fidelity said those developments strengthen Solana’s positioning as a technology platform capable of generating protocol revenue, with SOL at the center of that economic system. In the firm’s view, Solana’s fee revenue may already be close to a cyclical low. If on-chain activity continues to expand and value-capture proposals are implemented gradually, fee income could begin to recover over the next year.
Methodology notes
Momentum signal
Fidelity said its momentum signal evaluates a digital asset’s current state by combining price trend and volatility changes. The model compares short-term price movement with the longer-term trend while also judging whether current volatility is expanding or contracting relative to a recent baseline. Those two dimensions are merged into a momentum classification meant to identify periods when price and volatility move in the same direction, diverge from one another, or are in transition.
The lookback windows and other parameters are selected through an optimization process intended to create relatively clear and stable distinctions across different market states. Fidelity said the indicator is descriptive and is not meant to serve as a price forecast, investment advice or a trading signal.
Yardstick
Bitcoin Yardstick, also referred to as hash-rate Yardstick, can be understood as a rough valuation framework for the Bitcoin network. A traditional price-to-earnings ratio divides a stock price or company market value by earnings. Yardstick instead divides BTC’s total market capitalization by network hash rate to measure market value against the scale of resources securing the chain. The lower the ratio, the cheaper BTC appears relative to the hash power protecting the network.
Fidelity added that hash rate is not the same thing as corporate earnings, so Yardstick should be used only as a relative valuation framework, not as a direct equivalent to a stock P/E ratio.
NUPL
Across one-year and three-year horizons, Fidelity said the relationship between NUPL and future returns is among the stronger on-chain relationships in its research. Even so, Ethereum and Solana have much shorter operating histories than Bitcoin, which leaves fewer observations and lowers confidence in the historical relationship.
In theory, NUPL can fall below -1.0 when a network’s realized capitalization exceeds twice its total market capitalization. Fidelity said that in the early years of BTC, ETH and SOL, a large share of supply moved or was distributed before public market prices were fully formed. In Bitcoin’s case, some early tokens changed hands before an active market price existed. In ETH and SOL, early issuance, presales, pre-mines, seed financing and foundation allocations also affected realized price.
Those early distributions can push realized prices above later public market prices. When market prices then fall below realized prices, aggregate unrealized losses can exceed the network’s current market capitalization, pulling NUPL below -1.0. As networks mature and accumulate more on-chain transaction history, realized capitalization should reflect actual market trading more than early distribution events. Fidelity said that tends to improve NUPL’s usefulness over time.