Fidelity anticipates Bitcoin’s stability and opportunities for Ethereum in its Q2 forecast.

The varied performances of Bitcoin (BTC) and Ethereum (ETH) during the first quarter have led to different anticipations for the second quarter, according to Fidelity Digital Assets in a report from April 28.

Bitcoin wrapped up the first quarter close to $82,560, marking a drop of over 20% from its record high of $108,000 reached in December 2024. Despite this decline, the cryptocurrency showed robust on-chain fundamentals.

Conversely, Ethereum experienced a sharp decline of 45% within the same timeframe, attributed to its technical vulnerabilities and reduced network activity.

Fidelity’s assessment highlighted that despite these challenges, technical indicators and accumulation trends remained stable, indicating potential mid- to long-term resilience. At the end of the quarter, Ethereum’s value stood at $2,246, reflecting pervasive weakness; nevertheless, valuation metrics suggested possible opportunities for long-term investors.

Bitcoin stabilizes, fundamentals sound

In spite of short-term fluctuations, Fidelity’s report indicated that critical technical indicators for Bitcoin remained promising.

The golden cross that materialized in late 2024 was still in effect at the close of the first quarter, even as the asset traded 4% below its 200-day moving average.

Furthermore, on-chain analytics revealed that long-term holders were increasing their holdings, as the illiquid supply rose and exchange balances diminished, implying that investors were moving Bitcoin into self-custody.

Fidelity noted that Bitcoin’s MVRV Z-Score, which gauges valuation against realized value, had decreased but still sat in a neutral zone, indicating that profit margins had contracted without prompting a widespread sell-off.

In addition, the Reserve Risk metric indicated favorable long-term risk-reward scenarios, bolstered by macroeconomic factors like potential rate cuts from the Federal Reserve and heightened institutional interest.

The health of Bitcoin miners remained stable. While profitability fell relative to the last quarter of 2024, mining revenue maintained levels above year-long averages, and hash rate growth continued at a healthy rate.

The Puell Multiple indicated that mining returns were aligning with historical averages, showing resilience in mining operations despite the halving event in April 2024.

Fidelity concluded that Bitcoin’s ongoing consolidation phase could present opportunities for long-term investors to accumulate, with critical support levels near $86,000 and $88,500 acting as significant technical markers.

Ethereum endures short-term challenges

Ethereum’s notable price drop in the first quarter led to a decline in short-term technical indicators. ETH fell beneath its 200-day and 50-day moving averages, with a death cross pattern emerging in early March.

Fidelity assigned Ethereum a negative outlook for the short term, reflecting these technical setbacks and decreasing network engagement.

Nonetheless, when looking at valuation and network fundamentals, the situation appeared more nuanced. Fidelity reported that Ethereum’s MVRV Z-Score entered an “undervalued” phase in March, historically linked to periods of long-term accumulation.

Additionally, the Net Unrealized Profit/Loss (NUPL) metric also signaled capitulation, indicating that current prices were approaching historical lows relative to earlier market cycles.

During the first quarter, activity on Ethereum’s main layer saw modest decreases in new and active addresses as well as transaction volume. Layer 2 transaction activity also dropped by 11%, breaking previously established growth trends.

Fidelity pointed out that upcoming developments like the Pectra upgrade, which aims to double the blob capacity, could be pivotal for reigniting network activity.

Staking participation saw a slight rebound after a rare decline in the previous quarter, and network issuance dynamics shifted to a slightly inflationary state, with an annualized inflation rate of 0.63% noted during the quarter.

Fidelity attributed this shift to increased staking participation and lower transaction fees, which led to a decrease in the volume of ETH being burned.

Investor perspective for Q2

Regarding Bitcoin, Fidelity perceives a neutral short-term outlook but retains a positive perspective for the medium and long term, bolstered by strong on-chain metrics and ongoing institutional momentum.

The report advised investors to be vigilant about support levels and potential macroeconomic triggers, including shifts in monetary policy and government initiatives.

On the other hand, it cautioned about Ethereum’s immediate prospects due to ongoing technical weaknesses. Nevertheless, it indicated that the current valuation metrics provide an attractive entry point for long-term investors, especially if upcoming network enhancements and improvements in Layer 2 activity come to fruition.

The report concluded that while Bitcoin demonstrates signs of stability amidst its consolidation, Ethereum might represent contrarian value opportunities for those investors prepared to navigate short-term volatility.