Bitcoin (BTC) and Ethereum (ETH) contrasting performance in the first quarter gave rise to diverse outlooks in the second quarter, Fidelity Digital Assets said in a report on April 28th.
Bitcoin closed its first quarter trading at nearly $82,560, down more than 20% from its all-time high of $108,000 in December 2024. However, the flagship code maintained the foundation of strong chains.
Meanwhile, due to technical weaknesses and reduced network activity, Ethereum fell 45% over the same period.
Fidelity’s analysis highlighted that technical indicators and accumulation trends remain stable, supporting medium- and long-term resilience. Ethereum closed the quarter at $2,246, reflecting a widespread decline, but metrics suggest potential opportunities for long-term investors.
Bitcoin is integrated and the foundation is undamaged
Despite the short-term volatility, Fidelity’s report found that Bitcoin’s main technical signal remains constructive.
The Golden Cross, which formed in the second half of 2024, was still intact at the end of the first quarter, but its assets were 4% below its 200-day moving average.
Furthermore, on-chain data suggests that long-term holders have accumulated, illiquid supply has increased and exchange balances continue to decline, suggesting investors are independent of Bitcoin.
Fidelity said Bitcoin’s MVRV Z score, which was used to measure valuations compared to realised value, remained neutral, indicating that profit margins were compressed without triggering a wide range of sells.
Similarly, reserve risk metrics suggested favorable long-term risk compensation conditions supported by macro factors such as reduced Federal Reserve potential rates and institutional adoption.
Minor’s health remained stable. Although profitability declined compared to the last quarter of 2024, miners’ revenues were above the 365-day average, with hashrate growth continuing at a healthy pace.
Puer multiples indicate that mining returns remain close to historical norms, reflecting the resilience of mining operations despite half of April 2024.
Fidelity concluded that Bitcoin’s current integration phase could create opportunities for long-term investors to accumulate, with support levels close to $86,000 and $88,500 could create opportunities to represent key technical thresholds.
Ethereum faces short-term weaknesses
A sharp drop in Ethereum prices in the first quarter caused short-term technology signals to deteriorate. ETH fell below the 200- and 50-day moving averages, forming a cross-pattern of deaths, formed in early March.
Fidelity assigned a negative short-term outlook for Ethereum, reflecting these technical weaknesses and declining network activity.
However, the fundamentals of evaluation and networking have drawn more complicated pictures. Fidelity reported that Ethereum’s MVRV Z-Score had entered the “undervalued” zone in March, historic relationship with the long-term accumulation stage.
Net unrealized profit/loss (NUPL) metrics also moved into the yield area, suggesting that current prices are closer to historical lows compared to past cycles.
Activities in the Ethereum base layer showed moderate reductions in new addresses, active addresses, and transaction counts in the first quarter, with Layer 2 transaction volume dropping by 11%, indicating a break from previous growth trends.
Fidelity said future developments, such as Pectra upgrades that double the blob capacity, could be important to re-acquire network activity.
After a rare decline in the last quarter of 2024, sedating participation was modestly rebounded, with network issuance dynamics shifting slightly, with annual inflation rates of 0.63% during the quarter.
Fidelity reduced the amount of ETH burned, due to this change due to higher staking participation and reduced transaction fees.
Investor Outlook for the Second Quarter
For Bitcoin, Fidelity looks at a neutral short-term environment, but maintains a positive attitude towards medium-term and long-term vision based on strong on-chain data and ongoing institutional momentum.
The report advised investors to monitor levels of support and potential macroeconomic catalysts, including changes in monetary policy and government initiatives.
Meanwhile, as the technical weakness continues, it warned of Ethereum’s short-term outlook. However, the company proposed that current metrics present an attractive entry point for long-term investors. Especially when future network upgrades and improvements for L2 activity come into effect.
The Fidelity Report concluded that while Bitcoin shows signs of stability in the consolidation, Ethereum could offer reverse value opportunities for investors looking to navigate short-term volatility.
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