JPMorgan: Ether Must Boost Activity to Compete with Bitcoin
JPMorgan’s analysts on ether and altcoins indicate that these tokens are unlikely to catch up to bitcoin without a significant increase in network activity.
Summary
- JPMorgan mentioned that ether and altcoins will continue to lag behind bitcoin without substantial advancements in DeFi and real-world applications.
- Bitcoin spot ETFs have managed to recover around two-thirds of recent outflows, while ether ETFs have only recouped about one-third.
- The bank warned that the upcoming Ethereum upgrades, Glamsterdam and Hegota, may not independently boost network demand.
According to JPMorgan, ether and the wider altcoin market are unlikely to rebound from a prolonged underperformance relative to bitcoin unless there’s a notable increase in network activity, DeFi engagement, and real-world use scenarios.
The bank’s analysts, led by managing director Nikolaos Panigirtzoglou, emphasized that bitcoin continues to excel over ether across nearly all institutional measures. This commentary comes as bitcoin is trading close to $76,760, while ether is around $2,260.
Bitcoin ETFs drive recovery
Bitcoin spot ETFs have recovered about two-thirds of the outflows resulting from the selloff related to the Iran conflict, whereas ether spot ETFs have only regained roughly one-third, according to JPMorgan. CME futures positioning for bitcoin is nearly back to pre-crash levels, while ether has yet to catch up.
“This trend of underperformance that began in 2023 is not likely to change unless we observe meaningful enhancements in network activity, DeFi, and real-world applications,” Panigirtzoglou noted.
Why Ethereum upgrades might not suffice
The forthcoming Ethereum upgrades, Glamsterdam and Hegota, aim to enhance scalability and reduce transaction costs. However, JPMorgan cautioned that previous upgrades did not translate into increased on-chain activity; instead, they lowered Layer 2 costs and primary-chain fees, undermining the ETH burn mechanism and increasing net supply.
Earlier warnings from the bank on Ethereum upgrades were highlighted last week on crypto.news, where analysts argued that technical enhancements alone cannot counter reduced burning unless demand sufficiently increases to absorb the added supply.
Altcoin liquidity and hacks dampen confidence
Beyond ether, JPMorgan stated that altcoins have lagged behind bitcoin since 2023 due to tighter liquidity, diminished market depth and breadth, sluggish growth in DeFi, and recurring hacks and security breaches.
“These factors have undermined confidence in the broader altcoin ecosystem and dissuaded new capital from being deployed,” the analysts commented.
Momentum investors, including commodity trading advisors and crypto quant funds, have maintained cautious positions on both assets following the deleveraging event in October. The bank’s prior prediction for institutional inflows in 2026 was centered on bitcoin as the primary beneficiary of regulatory enhancements.
CLARITY Act identified as a potential catalyst
JPMorgan pointed out regulatory clarity as a potential game-changer. The CLARITY Act, which clarifies the classification of digital assets under the SEC and CFTC, successfully passed the Senate Banking Committee with a bipartisan 15-9 vote on May 14.
The bank has indicated that its passage could ignite new institutional activity in the realms of crypto venture funding, mergers and acquisitions, IPOs, and adoption by conventional financial entities.
Until such developments occur, the report concludes that institutional capital will continue to lean towards bitcoin as the most favorable macro trade in the asset class.