A report from Fidelity Digital Assets suggests that Ethereum (ETH) might be undervalued, citing several on-chain metrics. Highlights include ETH trading at a discount, a recent dip in MVRV Z-Score indicating potential market bottoms, and a surge in layer-2 activity with 13.6 million active addresses. Though prices dipped significantly in Q1, there are signs that the market could rebound.
Fidelity Digital Assets recently released a report indicating that Ethereum (ETH) might be undervalued, based on several on-chain metrics. According to the report, the trading price of ETH seems to be operating at a discount compared to its potential value. As it stands, the BTC to ETH market cap ratio is echoing conditions that were seen back in mid-2020, which raises a few eyebrows among analysts.
Digging into the figures, Ethereum really took a hit in Q1, with ETH prices plummeting by 45%. This drop wiped out the gains following the US elections, pushing the price down from its January peak of $3,579. Fidelity’s research highlighted a critical situation in March where a death cross occurred, particularly with the 50-day simple moving average (SMA) dropping 21% below the 200-day SMA—a strong signal of bearish market momentum. Still, there’s talk that this short-term turmoil could eventually favour ETH holders.
One particularly eye-catching metric, the MVRV Z-Score—used to evaluate market value against realised value—dipped to -0.18 on March 9, signalling that ETH had ventured into the “undervalued” zone. Historically, these levels have often hinted at market bottoms, leading to a scenario where ETH may be seen as undervalued compared to its true worth. Meanwhile, the Net Unrealized Profit/Loss ratio fell to 0, indicating a so-called “capitulation” phase where unrealised profits and losses are effectively equal.
Interestingly, ETH’s realised price—averaging around $2,020—remains about 10% higher than its current trading price. This means many holders are sitting on unrealised losses. Although this trend appears bearish at first glance, the report points out that a mere 3% decline in realised price amid a larger 45% decrease hints at short-term holders rushing to sell, while long-term investors maintained their positions, potentially supporting stabilisation in price.
In terms of price action, Fidelity noted that even in 2022 when ETH prices dipped below realised prices, it didn’t lead to an instant recovery as further declines followed. Also, the report reflected on ETH’s market cap ratio relative to Bitcoin, currently at 0.13—a figure that’s been steadily declining over the last 30 months, mirroring those mid-2020 levels.
Switching gears to Ethereum’s ecosystem, data from growthepie.xyz suggests that engagement metrics are hitting new highs. The number of unique addresses interacting within the layer 2 networks reached 13.6 million, a jump of 74% over just a week. This surge mirrors an increase in Ethereum’s adoption and scalability capabilities.
Among the standout performers is Unichain, a new layer 2 protocol by Uniswap, with a remarkable 5.82 million weekly active addresses. This growth helped sharpen Ethereum’s layer 2 dominance, improving by nearly 59% within a week. Additionally, an anonymous crypto trader, known as CRG, pointed out that ETH managed to reclaim a position above the 12-hour Ichimoku cloud indicator for the first time since December 2024, signalling a possible bullish trend as the market sentiment appears to be shifting in the right direction.
Overall, it’s certainly a mixed bag of data for Ethereum, with significant risks and potential rewards. As always, this article serves just as a report and not financial advice; any investment carries risks, and readers should always do their own research before diving into the market.
