Fidelity Report: Multiple On-Chain Indicators Suggest ETH Price is Undervalued

Original author: Biraajmaan Tamuly

Original compilation: Deep Tide TechFlow

Key Points:

• Fidelity Digital Assets' report indicates that multiple on-chain metrics for Ethereum suggest that the trading price of ETH is below its valuation.

• The BTC/ETH market cap ratio has returned to mid-2020 levels.

• The number of active addresses on Ethereum's Layer 2 networks has reached a new high of 13.6 million.

New data from Fidelity Digital Assets suggests a cautiously optimistic outlook for Ethereum, indicating that its poor performance in the first quarter may present an opportunity. According to their latest Signals Report, Ether (ETH) fell by 45% in the first quarter, erasing gains made after the U.S. elections, having peaked at $3,579 in January.

The price of Ether experienced a death cross in March, with the 50-day simple moving average (SMA) dropping 21% below the 200-day SMA, reflecting bearish momentum. However, Fidelity notes that the short-term pain may turn favorable for Ether.

The investment firm pointed out that the MVRV Z-Score (a comparison of market value to realized value) dropped to -0.18 on March 9, entering the "undervalued" range. Historically, such levels typically signal market bottoms, indicating that Ether "looks cheaper" compared to its "fair value." The Net Unrealized Profit/Loss (NUPL) ratio also fell to 0, indicating a "surrender" 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 $2,020, which is 10% higher than its current value, showing that holders are facing unrealized losses. While this trend is bearish, the firm notes that the actual price has only slightly decreased by 3% compared to the 45% drop, suggesting that short-term holders have sold off while long-term holders have held firm, potentially stabilizing the underlying price.

However, the firm emphasizes that in 2022, despite ETH prices falling below actual prices, it continued to decline further before rebounding.

Fidelity also cited the market cap ratio of Ethereum to Bitcoin at 0.13, which is at mid-2020 levels and has been declining for 30 months.

Ethereum/Bitcoin Market Cap Ratio

Source: Fidelity Digital Assets Signals report

Ethereum Ecosystem Participation Hits New Highs

Data from growthepie.xyz indicates that the number of unique addresses interacting with Layer 1 or Layer 2 networks within the Ethereum ecosystem has reached a historic high of 13.6 million. The proportion of active addresses increased by 74% over the past week, indicating the network's scalability and growing adoption.

Weekly Interactions of Ethereum with 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 Layer 2 dominance by 58.74% over the past seven days.

Anonymous crypto trader CRG pointed out that the ETH price has recovered 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, suggesting bullish sentiment.

Ethereum 12-Hour Analysis by CRG

Source: X.com

This article does not contain investment advice or recommendations. Every investment and trading activity involves risk, and readers should conduct their own research before making decisions.