JPMorgan: Ether Needs to Increase Activity to Rival Bitcoin

Analysts at JPMorgan have suggested that ether and altcoins will struggle to match bitcoin’s performance unless there is a notable uptick in network activity.

According to JPMorgan, ether and the broader altcoin market are unlikely to recover from a prolonged period of underperformance compared to bitcoin unless there’s a marked increase in network activity, DeFi involvement, and practical use cases.

Leading the analysis, managing director Nikolaos Panigirtzoglou pointed out that bitcoin consistently outperforms ether across almost all institutional metrics. This commentary is set against a backdrop where bitcoin is trading near $76,760 and ether at approximately $2,260.

Bitcoin ETFs fuel recovery

Bitcoin spot ETFs have managed to recover about two-thirds of the outflows caused by the selloff linked to the Iran conflict, while ether spot ETFs have only regained around one-third, per JPMorgan. CME futures positioning for bitcoin is almost back to pre-crash levels, yet ether has yet to catch up.

“The ongoing trend of underperformance that began in 2023 is unlikely to shift unless we witness significant improvements in network activity, DeFi, and real-world applications,” Panigirtzoglou remarked.

Challenges of Ethereum upgrades

The upcoming Ethereum upgrades, Glamsterdam and Hegota, are designed to improve scalability and lower transaction costs. However, JPMorgan expressed concerns that past upgrades have not led to increased on-chain activity; rather, they resulted in lower Layer 2 costs and base-chain fees, which undermined the ETH burn mechanism and increased net supply.

Previous warnings from the bank regarding Ethereum upgrades were emphasized last week on crypto.news, where analysts argued that technical improvements alone cannot offset reduced burning without a substantial increase in demand to absorb the additional supply.

Liquidity issues and hacks erode trust in altcoins

Beyond ether, JPMorgan noted that altcoins have been trailing bitcoin since 2023 due to tighter liquidity, reduced market depth and breadth, slow growth in DeFi, and ongoing hacks and security concerns.

“These issues have diminished confidence in the broader altcoin sector and deterred new capital from being invested,” the analysts stated.

Momentum investors, such as commodity trading advisors and crypto quant funds, have taken a cautious stance on both assets following the deleveraging event in October. The bank’s prior projection for institutional inflows in 2026 focused on bitcoin as the main beneficiary of regulatory improvements.

Regulatory clarity through the CLARITY Act

JPMorgan highlighted regulatory clarity as a potential significant factor. The CLARITY Act, which seeks 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 indicated that its passage could spark fresh institutional interest in crypto venture funding, mergers and acquisitions, IPOs, and adoption by traditional financial institutions.

Until such changes materialize, the report concludes that institutional investment will likely continue to favor bitcoin as the primary macro trade in the asset class.