Ethereum price drops 45% as signs of bottom emerge

Ethereum (CRYPTO:ETH) may be trading below its fair value, according to Fidelity Digital Assets, which observed multiple onchain indicators signaling potential capitulation and undervaluation.

In its latest Signals Report, Fidelity highlighted Ether’s 45% decline during the first quarter, dropping from a January peak of $3,579 to around $1,794.

The downturn erased post-election gains and led to a death cross in March, where the 50-day simple moving average fell 21% below the 200-day average, signaling bearish momentum.

Despite this, Fidelity pointed to a possible bottoming out. The MVRV Z-Score fell to -0.18 on March 9, historically a zone associated with undervaluation.

“Ether was looking cheap,” the report said, based on a comparison of market value to realised value.

The Net Unrealized Profit/Loss (NUPL) ratio also dropped to 0, suggesting a phase of capitulation in which holders’ unrealised profits and losses were balanced. Fidelity described this as a neutral zone, potentially reflecting market exhaustion.

Realised price data showed Ether’s average cost basis at $2,020, about 10% higher than its market price, suggesting most holders are sitting on unrealised losses.

However, the small 3% drop in realised price, despite the broader 45% plunge, may suggest that short-term holders were primarily responsible for the selling.

Fidelity noted this could indicate long-term holders are maintaining positions, which may help stabilise Ether’s price base.

The report also examined the ETH/BTC market cap ratio, which is now at 0.13—levels last seen in mid-2020. This ratio has been declining for 30 months.

Meanwhile, Ethereum’s network activity rose.

Based on data from growthepie.xyz, addresses interacting with layer-2 solutions reached a record high of 13.6 million, a 74% increase in one week. 

According to Fidelity, this growth in activity may reflect continued development in Ethereum’s ecosystem despite price weakness.

At the time of reporting, the Ethereum price was $1,796.76.