Fidelity’s latest report on digital assets indicates that the current price of Ethereum may be undervalued. Despite its recent lackluster performance, multiple on-chain indicators and ecosystem activity reveal potential rebound opportunities, sparking cautious optimism in the market regarding ETH’s prospects. This article is based on Biraajmaan Tamuly’s piece “Ethereum’s ‘capitulation’ suggests ETH price is undervalued: Fidelity report,” organized, compiled, and rewritten by Shenchao TechFlow.
(Background: Vitalik: Ethereum is overly complex; L1 should simplify to a level “close to Bitcoin” within five years)
(Context: The Ethereum community protests against “over-commercialization of L2,” an independent team pushes Ethereum R1, insisting on no token issuance and relying on decentralized fundraising)
Key Points:
The report from Fidelity Digital Assets states that several on-chain indicators for Ethereum suggest that the trading price of ETH is below its valuation. The BTC/ETH market capitalization ratio has returned to levels seen in mid-2020. The number of active addresses in Ethereum’s Layer 2 networks has reached a new high of 13.6 million.
New data from Fidelity Digital Assets implies a cautiously optimistic stance towards Ethereum, suggesting that its poor performance in the first quarter might present an opportunity. According to their latest Signals Report, Ether (ETH) fell 45% in the first quarter, erasing the gains it had achieved after the U.S. elections, where it peaked at $3,579 in January.
Ether’s price experienced a death cross in March, with the 50-day simple moving average (SMA) declining 21% below the 200-day SMA, reflecting bearish momentum. However, Fidelity notes that short-term pain may shift to favor Ether.
The investment firm points out that the MVRV Z-Score (Market Value to Realized Value comparison) dropped to –0.18 on March 9, entering the “undervalued” zone. Historically, such levels often indicate market bottoms, suggesting that Ether “appears cheaper” compared to its “fair value.” The Net Unrealized Profit/Loss (NUPL) ratio also fell to 0, indicating a “capitulation” state, where unrealized profits equal losses, suggesting holders are in a neutral position.
Ethereum’s MVRV Z-score
Source: Fidelity Digital Assets Signal report
The actual price of ETH averages at $2,020, which is 10% higher than its current value, indicating that holders are facing unrealized losses. Although this trend is bearish, the firm notes that the actual price has only slightly decreased by 3% compared to the 45% drop, indicating that short-term holders have sold off, while long-term holders have remained steadfast, potentially stabilizing the base price.
However, the company emphasizes that in 2022, despite ETH’s price dropping below its actual value, it continued to decline further before rebounding.
Fidelity also cites the market capitalization ratio of Ethereum to Bitcoin as 0.13, which is at mid-2020 levels and has decreased for 30 consecutive months.
Ethereum/Bitcoin Market Capitalization Ratio
Source: Fidelity Digital Assets Signals report
Ethereum Ecosystem Participation Hits New Highs
Data from growthepie.xyz indicates that the unique addresses interacting with Layer 1 or Layer 2 networks in the Ethereum ecosystem have reached a historical high of 13.6 million. The proportion of active addresses has increased by 74% over the past week, indicating the network’s scalability and growing adoption.
Weekly Interactions of Ethereum and Layer 2 Networks
Source: growthepie.xyz
Uniswap’s new Layer 2 protocol, Unichain, leads with over 5.82 million weekly active addresses, surpassing Base and Arbitrum. The collective increase in active addresses has boosted Ethereum’s dominance in Layer 2 networks by 58.74% over the past week.
Anonymous crypto trader CRG noted that the ETH price has returned above the 12-hour Ichimoku cloud indicator for the first time since December 2024. The Ichimoku cloud indicates a bullish trend when the price is above the cloud and the cloud turns green, signaling bullish sentiment.
Ethereum 12-hour Analysis by CRG
Source: X.com
This article does not contain investment advice or recommendations. Every investment and trading behavior involves risks, and readers should conduct their own research before making decisions.
