Fidelity Digital Assets analysis indicates several on-chain metrics suggest Ethereum price is nearing a bottom and may be undervalued.
The firm’s report states multiple Ethereum on-chain indicators imply ETH is trading below its perceived value.
Currently, the market cap ratio between Bitcoin and Ethereum sits at levels last seen in mid-2020.
Concurrently, active addresses on Ethereum’s layer-2 networks reached a new record high of 13.6 million.
Q1 Performance and Technical Indicators
Recent data from Fidelity Digital Assets points towards a potentially positive future for Ethereum, suggesting its poor Q1 performance might present an opportunity.
The company’s Signals Report details that Ether (ETH) dropped 45% in Q1, erasing gains achieved after the US election and following a January peak near $3,579.
ETH experienced a “death cross” technical pattern in March when its 50-day simple moving average (SMA) fell 21% below its 200-day SMA, indicating downward market momentum.
However, Fidelity suggests this short-term negative trend could benefit ETH later.
Analysis of Undervaluation Metrics
Fidelity highlighted that the MVRV Z-Score, which compares market value to the aggregate price paid for coins, decreased to -0.18.
This level falls into a territory historically identified as “undervalued.”
Such levels often coincide with market bottoms, implying ETH appeared relatively inexpensive compared to its estimated fair value.
Additionally, the Net Unrealized Profit/Loss (NUPL) ratio reached 0.
Fidelity interprets this as “capitulation,” a point where unrealized profits balance unrealized losses, representing a neutral position for investors.
Realized Price and Holder Behavior Insights
Ethereum’s realized price, averaging $2,020, is currently 10% higher than its market price, meaning the average holder has unrealized losses.
Although such an increase is typically a negative indicator, Fidelity observed that the realized price only dropped 3% compared to the market price’s 45% fall.
This difference suggests short-term investors likely sold, while long-term investors largely held their positions, potentially creating price stability.
Fidelity also cautioned that in 2022, ETH’s price fell below its realized price and continued downward before recovering.
Furthermore, Fidelity mentioned Ethereum’s market cap relative to Bitcoin is 0.13, matching mid-2020 levels and continuing a 30-month decline.
Record Growth in Layer 2 Ecosystem
Despite price challenges, Ethereum ecosystem engagement shows significant growth.
Data sourced from growthepie.xyz shows unique addresses using Ethereum layer 2 networks hit a record 13.6 million.
The number of active addresses increased by 74% in the last week, indicating growing network adoption and successful scaling via layer 2 solutions.
Unichain, Uniswap‘s new Layer-2 protocol, had the most activity, with over 5.82 million weekly active addresses, surpassing Base and Arbitrum.
This combined rise in active addresses boosted the market share of Ethereum’s layer 2 networks by 58.74% over the week.
Emerging Technical Signals
Separately, crypto trader CRG observed that ETH price moved above the 12-hour Ichimoku cloud indicator, a technical marker, for the first time since December 2023.
A price position above a green Ichimoku cloud typically signals a potential uptrend and positive market sentiment according to this indicator.
Also Read: Buterin Proposes Foundational Shift for Ethereum Efficiency
