Fresh analysis from Fidelity Digital Assets suggests that Ethereum (ETH) may be trading below its fair value, despite weak recent price performance, with multiple onchain metrics pointing to potential bottoming and network growth.
Key Highlights:
Fidelity notes Ethereum’s MVRV Z-Score dropped into the “undervalued” zone for the first time since the last cycle bottom.
Ethereum’s layer-2 active addresses surged to an all-time high of 13.6 million.
ETH’s market cap relative to Bitcoin (BTC) is back to mid-2020 levels.
Ethereum Undervalued Despite Bearish Q1 Performance, Fidelity Finds
According to Fidelity's latest Signals Report, Ethereum has endured a challenging first quarter, dropping 45% from its January peak at $3,579. ETH’s 50-day simple moving average fell 21% below its 200-day SMA in March, forming a death cross, traditionally seen as a bearish technical signal.
However, Fidelity’s onchain analysis reveals more optimistic signals for medium to long-term investors. The MVRV Z-Score, a key valuation metric comparing market value to realized value, fell to -0.18 on March 9 — a level historically associated with market bottoms and undervaluation.
Similarly, the Net Unrealized Profit/Loss (NUPL) ratio touched zero, signaling market-wide capitulation, where unrealized profits match unrealized losses — often marking a neutral base for future price movements.
"While the realized price for ETH is around $2,020 — about 10% higher than its current market price — the relatively minor decline in realized price compared to the sharp 45% spot market drop suggests strong hands (long-term holders) remain firm," Fidelity’s report highlighted.
Still, the report warns that historical precedence, such as in 2022, shows that ETH price can dip further below realized price before recovery begins.
Ethereum’s Relative Market Strength Weakens, Yet Network Growth Accelerates
The report also pointed out that Ethereum’s market cap ratio to Bitcoin has fallen to 0.13, levels last seen in mid-2020, after a 30-month steady decline. This suggests that, relative to Bitcoin, Ethereum is currently underperforming — a metric some analysts interpret as a potential contrarian buying signal.
Despite price weakness, Ethereum’s network activity is strengthening notably. Data from growthepie.xyz reveals that Ethereum’s layer-2 ecosystem reached 13.6 million active addresses — a new all-time high. Weekly active address growth is up 74% over the past week.
Among layer-2 solutions:
Unichain led with 5.82 million weekly active addresses, surpassing Base and Arbitrum.
Ethereum's layer-2 dominance in active addresses rose by 58.74% in the past seven days.
Such growth reflects increasing demand for cheaper and faster Ethereum-based transactions, reinforcing Ethereum’s strategic position in Web3 infrastructure.
Technical Indicators Show Early Recovery Signs
Anonymous trader CRG highlighted that ETH has reclaimed a position above the 12-hour Ichimoku Cloud for the first time since December 2024, typically seen as an early bullish reversal indicator.
"The move above the cloud, coupled with a green cloud formation, hints at a possible shift toward a more bullish trend," CRG wrote on X (formerly Twitter).
While Ethereum's price remains under pressure relative to Bitcoin and macro headwinds persist, Fidelity’s onchain metrics, strong network fundamentals, and technical improvements suggest that ETH may be undervalued and positioned for a longer-term recovery.
Upcoming catalysts, including potential spot Ethereum ETF approvals and broader adoption of layer-2 scaling solutions, could further support bullish momentum.
