BCGAME - Free 5BTC Daily Bonus!- Ethereum lags behind Bitcoin among institutional investors.
- Altcoins are suffering from low liquidity and less DeFi activity.
- Ethereum updates may not boost the price of ETH.
Ethereum and other altcoins continue to underperform Bitcoin even after the recent cryptocurrency market recovery, according to JPMorgan analysts. The assessment highlights that BTC has regained ground more consistently among institutional investors and exchange-traded products.
According to the report led by Nikolaos Panigirtzoglou, the performance gap began in 2023 and there are still no clear signs of change. Analysts stated that significant improvements in network activity, the DeFi sector, and real-world applications would be necessary to alter this situation.
Bitcoin also showed a more solid recovery in spot ETF flows and institutional futures contracts. While Bitcoin ETFs recovered about two-thirds of previous outflows, Ethereum ETFs managed to recover only one-third of the lost volume.
In futures contracts traded on the CME, the scenario also favored BTC. According to the bank, institutional investors rebuilt their exposure to Bitcoin at a faster pace, while Ethereum remains below previous positioning levels.
Even with the recovery in the cryptocurrency market, quantitative traders and momentum-focused funds still remain "slightly below ideal exposure" in both Bitcoin and Ethereum after the deleveraging event that occurred in October of last year.
Analysts also reviewed upcoming Ethereum upgrades planned for this year, including the Glamsterdam and Hegota upgrades. These changes are expected to increase network scalability and reduce transaction costs on the main layer.
Despite this, JPMorgan assesses that previous Ethereum upgrades have failed to significantly increase network activity over the past three years. Instead, the upgrades have reduced the costs of Layer 2 solutions, decreasing fees generated on the main blockchain and weakening the ETH burning mechanism.
"It remains to be seen whether these upcoming improvements will be able to increase network activity or at least generate enough demand growth to offset the continued reduction in Ethereum's burning mechanism and the consequent increase in net supply," the analysts said.
The report also highlighted that altcoins have faced difficulties since 2023 due to reduced liquidity, shallower market depth, limited growth in the DeFi sector, and successive hacker attacks on the cryptocurrency industry.
"All of these factors have eroded confidence in the broader altcoin ecosystem and discouraged the inflow of new capital," the analysts added.
