A recent Signals Report by Fidelity Digital Assets suggests that Ethereum (ETH) may be entering an accumulation phase after a significant Q1 downturn, potentially presenting a buying opportunity for long-term investors.
According to Fidelity’s analysis, Ethereum plunged 45% in Q1 2025, erasing gains made after the U.S. elections and falling from a January high of $3,579. This sharp decline triggered a death cross in March, where the 50-day simple moving average (SMA) dropped 21% below the 200-day SMA, typically signaling a bearish trend.
Key On-Chain Metrics Suggest ETH Undervalued
Despite the bearish price action, Fidelity highlighted bullish on-chain indicators. The MVRV Z-Score, which evaluates whether ETH is over- or undervalued by comparing market and realized value, dropped to -0.18 on March 9. This level has historically coincided with market bottoms, suggesting Ether was “looking cheap.”
The Net Unrealized Profit/Loss (NUPL) ratio also fell to 0, indicating a capitulation phase, where holders’ unrealized profits match their losses, often seen as a potential inflection point.
Fidelity reported that ETH’s realized price, averaging $2,020, is about 10% higher than its current spot price, meaning many holders are sitting on paper losses. Yet, while the realized price dropped only 3%, the spot price fell 45% — implying that short-term holders likely exited, while long-term holders remained steady, potentially stabilizing ETH’s base.
Still, the report cautioned that in 2022, similar undervaluation signals didn’t prevent ETH from declining further before eventually rebounding.
Ethereum-Bitcoin Ratio Signals Further Weakness
Fidelity’s analysis also pointed to the ETH/BTC market cap ratio, which now sits at 0.13, levels last seen in mid-2020. The ratio has been in decline for 30 months, indicating relative weakness in Ethereum’s performance versus Bitcoin.
Ethereum Ecosystem Sees Surge in Layer-2 Activity
Despite price weakness, Ethereum’s ecosystem engagement is on the rise.
According to data from growthepie.xyz, active addresses interacting with layer-2 networks reached an all-time high of 13.6 million — a 74% weekly increase.
The rise is being driven by Unichain, Uniswap’s newly launched layer-2 protocol, which led with 5.82 million active weekly users, outpacing both Base and Arbitrum. Collectively, this activity boosted Ethereum’s layer-2 dominance by 58.74% over the past seven days, underscoring increasing adoption and scalability improvements.
Technical Indicators Turn Bullish
Adding to the cautious optimism, anonymous trader CRG noted that ETH recently climbed above the 12-hour Ichimoku Cloud for the first time since December 2024. This signal, combined with a green cloud, typically indicates bullish momentum.
Outlook: Short-Term Pain, Long-Term Opportunity?
While Ethereum has suffered a sharp correction, Fidelity’s report emphasizes that on-chain metrics and rising ecosystem usage may support a medium- to long-term recovery. The convergence of undervaluation signals, ecosystem growth, and technical recovery could present an opportunity, though past performance reminds investors to remain cautious.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Cryptocurrency investments are volatile and risky. Always conduct your research before making any investment decisions.
