Fidelity Report: Multiple on-chain indicators suggest that ETH price is undervalued

Author: Biraajmaan Tamuly

Compiled by: Shenchao TechFlow

Key Points:

Fidelity's report on digital assets indicates that several on-chain metrics for Ethereum suggest that the trading price of ETH is below its valuation.

The BTC/ETH market capitalization ratio has returned to the levels seen in mid-2020.

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

New data from Fidelity Digital Assets suggests a cautiously optimistic stance on Ethereum, indicating that its poor performance in the first quarter could present an opportunity. According to their latest "Signals Report", Ether (ETH) dropped 45% in the first quarter, erasing the gains it achieved after the U.S. elections, having peaked at $3579 in January.

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

The investment firm pointed out that the MVRV Z-Score (the comparison between market value and actual value) fell to -0.18 on March 9, entering the "undervalued" range. Historically, this level usually indicates a market bottom, suggesting that Ethereum "looks cheaper" compared to its "fair value." The net unrealized profit/loss (NUPL) ratio also dropped to 0, indicating a "surrender" state, where unrealized profits equal losses, implying that holders are in a neutral position.

MVRV Z-score of Ethereum

Source: Fidelity Digital Assets Signal report

The actual price of ETH averages $2020, which is 10% higher than its current value, indicating that holders are facing unrealized losses. Although this trend is bearish, the company points out that the actual price has only slightly decreased by 3% compared to a 45% drop, suggesting that short-term holders have sold off while long-term holders have remained steadfast, potentially stabilizing the underlying price.

However, the company emphasized that in 2022, despite the ETH price dropping below its actual value, it continued to decline further before the rebound.

Fidelity also cited the market capitalization ratio of Ethereum to Bitcoin at 0.13, which is at the mid-2020 level and has declined for 30 months.

Ethereum/Bitcoin Market Capitalization Ratio

Source: Fidelity Digital Assets Signals report

Ethereum ecosystem participation reaches a new high

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, signifying the network's scalability and growing adoption.

Weekly Interaction Between 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 Layer 2 network dominance by 58.74% in the past seven days.

Anonymous crypto trader CRG pointed out that the ETH price has returned above the 12-hour Ichimoku cloud indicator for the first time since December 2024. The Ichimoku cloud indicates that when the price is above the cloud and the cloud turns green, it shows an upward trend, indicating bullish sentiment.

Ethereum 12-Hour Analysis provided by CRG

Source: X.com

This article does not contain investment advice or recommendations. Each investment and trading action involves risks, and readers should conduct their own research when making decisions.