JPMorgan: Without stronger network activity, Ethereum and altcoins may continue to underperform Bitcoin

JPMorgan analysts pointed out in their latest report that although the overall cryptocurrency market has recovered after the Iran conflict, Ethereum and other altcoins continue to underperform compared to Bitcoin. The analyst team led by Managing Director Nikolaos Panigirtzoglou stated that this trend, which began in 2023, "is unlikely to change unless we see meaningful improvements in network activity, DeFi, and real-world applications."

The analysts noted that since the conflict triggered a market sell-off, Bitcoin's recovery in spot ETF fund flows and institutional futures positions has outperformed Ethereum. The spot Bitcoin ETF has recovered about two-thirds of the previous outflows, while the spot Ethereum ETF has only recovered about one-third. CME futures positions also indicate that institutional investors are rebuilding their Bitcoin exposure more aggressively than Ethereum.

Regarding the upcoming Ethereum upgrades (Glamsterdam and Hegota), analysts questioned whether they would be sufficient to improve ETH's relative performance. Upgrades over the past three years have primarily reduced Layer 2 transaction costs, which has weakened the Ethereum network's fee generation and token burn mechanisms, leading to an accelerated net supply growth and weakened price support. Whether the new upgrades can generate enough new demand and network activity remains to be seen.

For altcoins, analysts believe that since 2023, weak liquidity conditions, low market depth and breadth, limited growth in DeFi activity, and recurring hacking and security incidents have collectively eroded market confidence and hindered the deployment of new capital.