Ethereum Price Insight: Fidelity Report Says ETH Deeply Undervalued

Are you wondering about the future direction of the Ethereum price? Recent analysis from a major institutional player suggests there might be more to the picture than recent market performance indicates. A new report from Fidelity Digital Assets offers a cautiously optimistic view, pointing to several on-chain indicators that suggest ETH price could be trading at a discount.

Fidelity Report Highlights Key On-Chain Metrics

The latest Signals Report from Fidelity Digital Assets dives deep into the Ethereum network, analyzing various data points to assess its current valuation. While Ethereum experienced a challenging first quarter, dropping significantly from its January peak, the report suggests this downturn may present an opportunity. Here are some of the key findings from the Fidelity report:

• **MVRV Z-Score:** This metric, comparing market value to realized value, dropped into the ‘undervalued’ zone (-0.18) in early March. Historically, this level has often coincided with market bottoms, implying Ether was potentially inexpensive relative to its fundamental value.
• **Net Unrealized Profit/Loss (NUPL):** The NUPL ratio reached 0, signaling a phase often referred to as ‘capitulation.’ At this point, the total unrealized profits held by network participants roughly equal total unrealized losses, indicating a neutral sentiment spot for holders.
• **Realized Price:** Averaging around $2,020, the realized price was about 10% above the market price at the time of the analysis. This indicates that the average holder was facing unrealized losses. However, the firm noted that the realized price only dropped a small percentage compared to the larger market price decline, suggesting short-term holders were selling while long-term holders maintained positions, potentially creating a stable price base.

These on-chain metrics provide a data-driven perspective on the network’s health and investor behavior, moving beyond simple price charts.

Is Ethereum Undervalued Based on Historical Ratios?

Another point highlighted in the Fidelity report is the market capitalization ratio between Bitcoin (BTC) and Ethereum (ETH). The report noted that the BTC/ETH market cap ratio sat at 0.13, levels not seen since mid-2020. This ratio has been in decline for 30 months. While this trend might seem bearish on the surface, when combined with other on-chain signals suggesting potential capitulation and undervaluation, it adds another layer to the argument that Ethereum undervalued relative to Bitcoin compared to its historical performance in recent years.

Ecosystem Engagement Soars: A Bullish Sign?

Beyond valuation metrics, the health and activity of the Ethereum ecosystem are crucial indicators. Data from growthepie.xyz reveals a significant surge in engagement, particularly within Layer 2 networks. The number of unique addresses interacting with one or two Layer 2 networks reached a new all-time high of 13.6 million active addresses. This represents a substantial increase in weekly activity.

This growth in active addresses, up 74% in just one week, points to the increasing adoption and scalability capabilities of the network via Layer 2 solutions. The emergence of new protocols like Unichain by Uniswap, which quickly gained over 5.82 million weekly active addresses, is driving this trend. This collective increase has significantly boosted Ethereum’s Layer 2 dominance.

Technical Signals and Market Outlook

Adding to the potentially positive outlook, technical analysis from some traders suggests a shift. One analyst noted that the ETH price recovered a position above the 12-hour Ichimoku cloud indicator, a level not consistently held since late 2024. The Ichimoku Cloud is a momentum indicator; price moving above the cloud, especially as the cloud turns green, can signal a potential uptrend and bullish sentiment.

While the Fidelity report and surging Layer 2 activity paint a hopeful picture, it’s important to remember that market recovery is not guaranteed. The report itself noted that in 2022, ETH price continued to decline even after dipping below the realized price before eventually recovering. The market remains volatile, and external factors can always influence price movements.

Conclusion: Navigating the Ethereum Market

The recent analysis from Fidelity Digital Assets provides valuable insights into the current state of Ethereum. By examining key on-chain metrics like the MVRV Z-Score and NUPL, the report suggests that the recent price dip may have pushed Ether into undervalued territory, potentially marking a bottoming phase. Coupled with the significant and growing activity on Layer 2 networks, the fundamental picture for Ethereum’s utility and adoption appears strong.

While the short-term price action saw a ‘death cross’ and a significant Q1 decline, the underlying data suggests a potential opportunity. The comparison of the BTC/ETH ratio to mid-2020 levels also adds weight to the argument that, from a historical perspective, Ethereum undervalued status might be notable. As always, market analysis involves inherent risk, and readers should conduct thorough research before making investment decisions.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.