The contrasting performances of Bitcoin (BTC) and Ethereum (ETH) in the first quarter led to divergent outlooks in the second quarter, Fidelity Digital Assets said in an April 28 report.
Bitcoin ended the first quarter trading near $82,560, declining by over 20% from its December 2024 all-time high of $108,000. However, the flagship crypto maintained strong on-chain fundamentals.
Meanwhile, technical weaknesses and lower network activity caused Ethereum to fall 45% over the same period.
Fidelity’s analysis emphasized that technical metrics and accumulation trends remained stable, supporting mid- and long-term resilience. Ethereum closed the quarter at $2,246, reflecting broad weakness, although valuation metrics suggested potential opportunities for long-term investors.
Bitcoin consolidates, fundamentals intact
Despite short-term volatility, Fidelity’s report found that Bitcoin’s key technical signals remain constructive.
The golden cross formed in late 2024 was still intact at the end of the first quarter, although the asset traded 4% below its 200-day moving average.
Additionally, on-chain data showed that long-term holders were accumulating, with illiquid supply increasing and exchange balances continuing to decline, suggesting that investors were moving Bitcoin into self-custody.
Fidelity noted that Bitcoin’s MVRV Z-Score, used to measure valuation relative to realized value, declined but remained neutral, indicating profit margins had compressed without triggering a broad selloff.
Similarly, the Reserve Risk metric suggested favorable long-term risk-reward conditions, supported by macro factors such as potential Federal Reserve rate cuts and institutional adoption.
Miner’s health also remained stable. Although profitability declined compared to the last quarter of 2024, miner revenue stayed above 365-day averages, and hash rate growth continued at a healthy pace.
The Puell Multiple showed that mining returns stayed close to historical norms, reflecting resilience in mining operations despite the April 2024 halving.
Fidelity concluded that Bitcoin’s current consolidation phase could create opportunities for long-term investors to accumulate, with support levels near $86,000 and $88,500 representing important technical thresholds.
Ethereum faces short-term weakness
Ethereum’s sharp price decline in the first quarter resulted in deteriorating short-term technical signals. ETH fell below its 200-day and 50-day moving averages, and a death cross pattern formed in early March.
Fidelity assigned Ethereum a negative short-term outlook, reflecting these technical weaknesses and declining network activity.
However, valuation and network fundamentals painted a more complex picture. Fidelity reported that Ethereum’s MVRV Z-Score entered the “undervalued” zone in March, a historical association with long-term accumulation phases.
The Net Unrealized Profit/Loss (NUPL) metric also moved into capitulation territory, suggesting current prices were near historic lows relative to past cycles.
Activity on Ethereum’s base layer showed modest declines in new addresses, active addresses, and transaction counts during the first quarter, while layer 2 transaction volumes fell 11%, marking a break from previous growth trends.
Fidelity noted that upcoming developments such as the Pectra upgrade, which will double blob capacity, could be critical for reaccelerating network activity.
Staking participation rebounded modestly after a rare decline in 2024’s last quarter, and network issuance dynamics shifted slightly inflationary, with an annualized inflation rate of 0.63% during the quarter.
Fidelity attributed this change to higher staking participation and lower transaction fees, which reduced the volume of ETH burned.
Investor outlook for Q2
For Bitcoin, Fidelity sees a neutral short-term environment but maintains a positive stance over medium- and long-term horizons based on strong on-chain data and continued institutional momentum.
The report advised investors to monitor support levels and potential macroeconomic catalysts, such as shifts in monetary policy and government initiatives.
Meanwhile, it warned about Ethereum’s short-term prospects as technical weakness persists. However, the firm suggested that current valuation metrics present an attractive entry point for long-term investors, particularly if upcoming network upgrades and improvements in L2 activity materialize.
The Fidelity report concluded that while Bitcoin shows signs of stability amid consolidation, Ethereum may offer contrarian value opportunities for investors willing to navigate short-term volatility.
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