According to analysts at JPMorgan, ether and altcoins are unlikely to close the gap with bitcoin unless there is a notable surge in network activity.
Summary
- JPMorgan noted that ether and altcoins will persist in lagging behind bitcoin without significant progress in DeFi and practical applications.
- While bitcoin spot ETFs have recovered roughly two-thirds of their recent outflows, ether ETFs have only managed to regain about one-third.
- The bank cautioned that the forthcoming Ethereum upgrades, Glamsterdam and Hegota, may not be sufficient to independently enhance network demand.
JPMorgan believes that ether and the broader altcoin market are unlikely to recover from extended underperformance compared to bitcoin unless there’s a substantial rise in network activity, DeFi engagement, and real-world implementations.
The bank’s analysts, led by managing director Nikolaos Panigirtzoglou, emphasized that bitcoin outperforms ether in nearly all institutional metrics. This analysis comes at a time when bitcoin is trading near $76,760, while ether is around $2,260.
Bitcoin ETFs fuel recovery
Bitcoin spot ETFs have rebounded by about two-thirds of the outflows caused by the Iran conflict, whereas ether spot ETFs have only recouped approximately one-third, according to JPMorgan. CME futures positioning for bitcoin is nearly restored to pre-crash levels, while ether has yet to follow suit.
“The trend of underperformance that started in 2023 is unlikely to shift unless we see meaningful improvements in network engagement, DeFi, and tangible applications,” Panigirtzoglou remarked.
Potential limitations of Ethereum upgrades
The pending Ethereum upgrades, Glamsterdam and Hegota, intend to boost scalability and lower transaction costs. However, JPMorgan warned that previous upgrades did not lead to increased on-chain activity; rather, they reduced Layer 2 expenses and primary-chain fees, which weakened the ETH burn mechanism and raised net supply.
Previous warnings from the bank regarding Ethereum upgrades were referenced last week on crypto.news, where analysts asserted that technical improvements alone cannot mitigate decreased burning unless demand sufficiently grows to absorb the increased supply.
Altcoin liquidity and security breaches undermine confidence
Beyond ether, JPMorgan emphasized that altcoins have trailed behind bitcoin since 2023 due to tighter liquidity, reduced market depth and breadth, sluggish DeFi growth, and persistent hacks and security vulnerabilities.
“These elements have eroded confidence in the broader altcoin landscape and discouraged new investments,” the analysts stated.
Momentum investors, including commodity trading advisors and crypto quant funds, have maintained cautious stances on both assets following the deleveraging event in October. The bank’s earlier forecast for institutional inflows in 2026 highlighted bitcoin as the primary beneficiary of regulatory improvements.
CLARITY Act viewed as a potential catalyst
JPMorgan identified regulatory clarity as a potential transformative factor. The CLARITY Act, which aims to clarify 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 suggested that the act’s approval could stimulate new institutional activity in areas such as crypto venture capital, mergers and acquisitions, IPOs, and adoption by traditional financial institutions.
Until such developments materialize, the report concludes that institutional capital will likely continue to favor bitcoin as the most promising macro trade within the asset class.
