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

Written by: 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 market capitalization ratio of BTC/ETH 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 outlook on Ethereum, indicating that its poor performance in the first quarter could be an opportunity. According to their latest "Signals Report," Ether (ETH) fell 45% in the first quarter, erasing the gains it reached after the U.S. elections, peaking at $3,579 in January.

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

The investment company pointed out that the MVRV Z-Score (comparison of market value to actual value) dropped to -0.18 on March 9, entering the "undervalued" range. Historically, this level usually indicates a market bottom, suggesting 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 that holders are in a neutral position.

Ethereum's MVRV Z-score, Source: Fidelity Digital Assets Signal report

The actual price of ETH averages $2020, which is 10% higher than the current value, indicating that holders face unrealized losses. Although this trend is bearish, the company 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 remain steadfast, potentially stabilizing the underlying price.

However, the company emphasizes that in 2022, despite the ETH price falling below its actual value, it continued to decline further before rebounding.

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

Ethereum / Bitcoin market capitalization ratio, source: Fidelity Digital Assets Signals report

Ethereum ecosystem participation hits a new high

Data from growthepie.xyz indicates that the number of unique addresses interacting with layer one or layer two networks in the Ethereum ecosystem has reached a historic 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 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