Use of the verb fathom

Regarding the use of the verb fathom, is it correct to say this?

I can no longer fathom the difference between right and wrong.

Merriam-Webster says:

fathom: to penetrate and come to understand

So my understanding is that it's perfectly fine, but I wanted to make sure.

Yes that usage makes sense. Fathom is a little more intense than just understand. If you can't fathom something, then you cannot begin to understand even the most basic aspects of it. It's completely outside the realm of your understanding.

Fathom is a very unusual verb with severely restricted syntax, in that it's a Negative Polarity Item like drink a drop or ever (i.e, it requires a negative context, and is ungrammatical in an affirmative one):

• I haven't ever seen Niagara Falls. ~ *I have ever seen Niagara Falls.

• They say he doesn't drink a drop now. ~ *They say he drinks a drop now.

• I can no longer fathom the difference between right and wrong.

• *I can now fathom the difference between right and wrong.

And fathom is also a Possible Polarity Item, like tell time.
Possible polarity items require a potential-type ("diamond") modal auxiliary like
can, may, might, could, or some other modal word like possible or able.

• She can tell time. ~ She can't tell time. ~ *She didn't tell time.

• *I fathomed the difference between right and wrong. (no neg, no modal)

• *I didn't fathom the difference between right and wrong. (neg but no modal)
• *I can fathom the difference between right and wrong. (modal but no neg)
• I can't fathom the difference between right and wrong. (modal and neg)

The combination of these two restrictions makes it what's called an
Impossible Polarity Item in the trade; that's unusual, and means that it's not used often.