Ethereum’s ‘Capitulation’ Suggests ETH Price Is Undervalued: Fidelity Report

Introduction

Is Ethereum (ETH) poised for a rebound after a brutal Q1 performance? Fresh data from Fidelity Digital Assets suggests that ETH may be trading at a discount, with key on-chain metrics signaling potential undervaluation. Despite a 45% price drop in Q1 2025, the report highlights bullish indicators, including capitulation signals and surging layer-2 adoption. Could this be the calm before a storm of upward momentum?

Key On-Chain Metrics Point to Undervaluation

Fidelity’s latest Signals Report reveals that Ethereum’s MVRV Z-Score—a metric comparing market value to realized value—dropped to -0.18 in early March, entering the “undervalued” zone. Historically, such levels have marked market bottoms, suggesting ETH was trading below its fair value.

Another critical metric, the Net Unrealized Profit/Loss (NUPL) ratio, fell to 0, indicating “capitulation.” This phase, where unrealized profits equal losses, often precedes market recoveries as weak hands exit and long-term holders accumulate.

Realized Price vs. Market Price

ETH’s realized price—the average cost basis of all coins in circulation—stands at $2,020, roughly 10% above its current market price. This gap implies that most holders are sitting on unrealized losses, a scenario often seen before bullish reversals. Fidelity notes that while short-term holders panicked, long-term investors held firm, potentially stabilizing ETH’s floor price.

Ethereum vs. Bitcoin: A Historic Discount

The BTC/ETH market cap ratio has plummeted to 0.13, levels last seen in mid-2020. This 30-month decline suggests Ethereum is significantly undervalued relative to Bitcoin. For context, during ETH’s 2021 bull run, the ratio briefly fell below 0.05, hinting at room for upside if history repeats.

Layer-2 Adoption Hits Record Highs

While ETH’s price struggled, its ecosystem thrived. Data from growthepie.xyz shows Ethereum’s layer-2 networks hit 13.6 million weekly active addresses—a 74% surge in just seven days. Uniswap’s new Unichain protocol led the charge with 5.82 million addresses, outpacing giants like Arbitrum and Base.

Technical Indicators Flash Green

Crypto trader CRG spotted a critical bullish signal: ETH’s price reclaimed the 12-hour Ichimoku Cloud for the first time since December 2024. This technical pattern often precedes sustained uptrends, especially when the cloud turns green (bullish).

Conclusion: A Contrarian Opportunity?

Fidelity’s findings paint a nuanced picture: Ethereum’s price action appears disconnected from its robust fundamentals. Key takeaways for investors:

• Undervaluation Signals: MVRV Z-Score and NUPL suggest ETH is oversold.
• Ecosystem Strength: Layer-2 adoption is at all-time highs, reflecting scalability wins.
• Technical Rebound: The Ichimoku Cloud breakout hints at bullish momentum.

While past performance doesn’t guarantee future results, Ethereum’s current setup mirrors historical buy zones. For traders, this could be a chance to “buy when there’s blood in the streets”—but always DYOR (Do Your Own Research).

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Cryptocurrency investments are volatile and risky.