Fidelity’s Q2 Crypto Playbook: Bitcoin Holds the Line While Ethereum Pounces

Wall Street’s favorite crypto skeptic-turned-believer Fidelity just dropped its Q2 outlook—and surprise, surprise, they’re not hitting the panic button.

Bitcoin: The Rock (For Now)

The report paints BTC as the steady hand in a market still shaking off ETF hangovers and macro tantrums. No flashy predictions—just grudging respect for its ’digital gold’ chops holding up amid rate-cut chaos.

Ethereum: The Contender

Here’s where analysts get spicy. ETH gets framed as the high-beta play primed to ’eat Bitcoin’s lunch’ if the risk-on switch flips. Never mind that whole ’ultrasound money’ narrative collapse last cycle—this time it’s different, right?

Bonus Wall Street Shade: ’Our models suggest crypto allocations should remain... below 1.5% of portfolios.’ Translation: ’We’ll talk your book, but we’re not staking our bonuses on this casino.’

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.