Ethereum has continued to lag behind Bitcoin during the cryptocurrency market’s latest rebound, with analysts at JP Morgan saying weak network activity and fading confidence across the altcoin market have kept institutional demand tilted toward Bitcoin.
summary
- Bitcoin ETFs and CME futures recovered faster than Ethereum after the Iranian conflict-led market selloff.
- Ethereum upgrades over the past three years have failed to deliver meaningful growth in network activity, JPMorgan said.
- Repeated cryptocurrency hacks and weak DeFi activity continue to weigh on investor confidence in altcoins, according to JPMorgan.
According to A a report From JPMorgan Led by Managing Director Nikolaos Panigirzoglou, Bitcoin has recovered much faster than Ethereum in the wake of recent market turmoil linked to the Iranian conflict. Institutional investors have been rebuilding exposure to bitcoin across both spot exchange-traded funds and Chicago Mercantile Exchange futures markets at a pace not seen with ethereum, the bank said.
JPMorgan said spot bitcoin ETFs have already recovered nearly two-thirds of the outflows recorded during the conflict-triggered sell-off. In comparison, Ethereum ETFs have only recovered about a third of their previous withdrawals, indicating weak investor appetite for Ethereum despite the market recovery.
Analysts noted that data from CME futures positioning painted a similar picture. Institutional traders have almost completely regained their previous exposure to Bitcoin, while Ethereum’s position on the Chicago Mercantile Exchange remains well below previous levels.
At the same time, JPMorgan said momentum-driven investors, including commodity trading advisors and quantitative cryptocurrency funds, still appear slightly underweight to both Bitcoin and Ethereum following the deleveraging event seen last October.
Attention has also turned towards whether upcoming Ethereum network upgrades could revive activity on the blockchain and improve Ethereum’s standing against Bitcoin.
JPMorgan said major upgrades to Ethereum over the past three years have not translated into stronger usage of the network. Instead, the changes significantly reduced transaction costs on layer 2 networks, reducing fee revenues generated on the Ethereum main chain.
The lower fees also weakened Ethereum’s token burning mechanism, contributing to faster net supply growth and reducing one of the main sources of long-term Ethereum price support, analysts said.
Known as scheduled upgrades Glamsterdam and Higotha It is expected to improve scalability by increasing throughput and reducing costs on the Ethereum base layer. However, JP Morgan questioned whether cheap transactions alone would be enough to create sustainable demand growth across the network.
Analysts said it remains unclear whether the upgrades can generate enough new activity to offset the ongoing decline in token burning and the resulting increase in ether supply.
Beyond Ethereum, JP Morgan said altcoins have been struggling against Bitcoin since 2023 with weak liquidity conditions across the cryptocurrency sector. The bank cited weak market depth, slowing decentralized financial activity, and frequent security breaches as key reasons for investors to be more cautious towards the broader altcoin market.
frequent Superhero Operational failures across cryptocurrency platforms have also discouraged new capital from entering altcoins, according to the report, leaving Bitcoin in a stronger position as institutional investors continue to favor more established digital assets.
