Despite Poor Performance, Ethereum (ETH) May Be Sitting in a Market Bottoming Zone

Ethereum has underperformed in recent years including Q1 of 2025. However, based upon a number of metrics, the recent Q1 2025 Signals Report released by Fidelity indicates that Ethereum is undervalued.

In the ever-evolving landscape of cryptocurrency, Ethereum (ETH) has encountered a period of underperformance, notably in Q1 of 2025. Nonetheless, a recent report by Fidelity, examining a variety of metrics, suggests that the second-largest cryptocurrency may be undervalued.

Despite poor performance, there is reason to be cautiously optimistic that ETH may currently be sitting in a market bottoming zone, where it could be deemed as a good buying opportunity.

Q1 has shown that ETH has been holding bearish momentum following a 45% drop from the January peak of US$3,579 (AU$5,606). ETH formed a ‘death cross’ in March, where the 50-day simple moving average (SMA) fell below the 200-day SMA.

However, the MVRV Z-score, which is used to assess whether an asset is undervalued or overvalued in relation to its ‘fair value’, holds more reason for optimism. ETH scored -0.18 through this metric indicating that it is undervalued and that this may be a market bottom zone.

Ethereum’s market cap in relation to Bitcoin is at mid-2020 levels and has been persistently declining since the end of 2022. Fidelity labelled this trend as having taken place over 30 consecutive months. This indicates Ethereum’s performance in relation to Bitcoin has been poor.

The Signals Q1 2025 report also highlighted that the Net Unrealised Profit/Loss (NUPL) Ratio, which assesses market sentiment, has a reading of 0 at the end of Q1 which is labelled as ‘capitulation’. This implies that much of the downtrend move may have already occurred.

Other data suggests that an all-time-high of 13.6 million active addresses are interacting with Ethereum layer 2 networks. This is a positive sign for the scalability and activity of the Ethereum ecosystem.

Further data suggests that ETH has reclaimed above the 12-hour Ichimoku Cloud indicator, which suggests an uptrend, should ETH manage to stay above it. This is the first time this has occurred since December 2024.

This looks clean afETH back above 12H cloud for first time since December https://t.co/bt0LL05Ajo pic.twitter.com/W26wPAksj4

Persistent macro headwinds and bearish momentum still suggest that caution may be sensible. However, several metrics indicate that this may be a general bottoming and value zone for ETH.

Fidelity mirrored this sentiment, suggesting that the metrics regarding ETH are positive from a long-term relative valuation, but that short-term traders need to proceed with caution.