- JPMorgan analysts said ether and altcoins continue to underperform bitcoin despite the recent crypto market recovery.
- Spot bitcoin ETFs recovered around two-thirds of previous outflows, while spot ether ETFs recovered about one-third.
- Bitcoin futures positioning on CME recovered almost fully, while ether positioning remained below prior levels.
- Ethereum upgrades over the past three years reduced Layer 2 transaction costs but did not significantly increase network activity.
- Altcoins have struggled since 2023 due to weaker liquidity, lower market depth, limited DeFi growth, and repeated security breaches.
JPMorgan Says Ether and Altcoins Continue to Lag Bitcoin
Ethereum’s native ether token and other altcoins have continued to underperform bitcoin despite the broader crypto market recovery following the Iran conflict, according to JPMorgan analysts.
The analysts, led by managing director Nikolaos Panigirtzoglou, said the underperformance trend that started in 2023 is unlikely to change without meaningful improvements in network activity, decentralized finance activity, and real-world applications.
“And this underperformance trend that started in 2023 is unlikely to change unless we see meaningful improvements in network activity, DeFi and real world applications,” the JPMorgan analysts led by managing director Nikolaos Panigirtzoglou said in a report.
The analysts noted that bitcoin recovered more strongly than ether across both spot exchange-traded fund flows and institutional futures positioning after the market selloff linked to the conflict.
According to the report, spot bitcoin ETFs recovered roughly two-thirds of their previous outflows, while spot ether ETFs recovered only about one-third. The analysts also said CME futures positioning showed institutional investors rebuilt bitcoin exposure more aggressively than ether exposure. Bitcoin futures positioning recovered almost fully from its earlier drawdown, while ether futures positioning remained below previous levels. Recently, Bitcoin climbed above $82,000 as global risk sentiment improved amid reports of progress in U.S.–Iran peace negotiations. Nasdaq futures gained more than 1% during Wednesday’s European session as investors shifted back toward risk assets including cryptocurrencies and equities. recovery.
Ethereum Upgrades Face Questions Over Network Demand
JPMorgan analysts questioned whether upcoming Ethereum upgrades expected later this year would be enough to improve ether’s relative performance against bitcoin. The analysts said Ethereum upgrades introduced during the past three years did not significantly improve network activity. Instead, they mainly reduced Layer 2 transaction costs, lowering fees generated on the Ethereum network.
According to the report, the lower fees weakened Ethereum’s token burn mechanism, resulting in higher net supply growth and weaker price support for ether.
“It remains to be seen whether these coming improvements can succeed in boosting network activity or at least drive enough demand growth to offset the continued reduction in Ethereum’s burn mechanism and resulting net supply increase,” the analysts said.
The upcoming Glamsterdam and Hegota upgrades are expected to improve Ethereum scalability by increasing network throughput and lowering transaction costs on the base layer, reports from The Block.
Altcoin Market Faces Liquidity and Confidence Challenges
The analysts said altcoins have struggled against bitcoin since 2023 because of weaker liquidity conditions, lower market depth and breadth, limited growth in decentralized finance activity, and repeated hacks and security breaches across the crypto industry.
“All these factors have eroded confidence in the broader altcoin ecosystem and discouraged the deployment of fresh capital,” the analysts said.
The report said these factors continued to weigh on investor confidence and capital deployment across the broader altcoin market.
FAQs
1. Why does JPMorgan say ether is underperforming bitcoin?
JPMorgan analysts said ether continues to lag bitcoin because of weaker network activity, lower decentralized finance growth, and slower recovery in institutional investor positioning.
2. How did spot bitcoin ETFs perform compared to spot ether ETFs?
According to JPMorgan analysts, spot bitcoin ETFs recovered around two-thirds of previous outflows, while spot ether ETFs recovered only about one-third.
3. What concerns did JPMorgan raise about Ethereum upgrades?
The analysts said Ethereum upgrades over the past three years mainly reduced Layer 2 transaction costs but did not significantly increase network activity or demand on the Ethereum network.
4. Why have altcoins struggled against bitcoin since 2023?
JPMorgan analysts said weaker liquidity conditions, lower market depth, limited DeFi growth, and repeated security breaches across the crypto industry have negatively affected altcoin market confidence.
