Despite recent hype surrounding Bitcoin and spot exchange-traded funds (ETFs), JPMorgan believes that Ethereum will outperform Bitcoin in 2024.
In a Dec. 13 report, JPMorgan analysts wrote, "We believe that next year Ethereum will reassert itself and recapture market share within the crypto ecosystem."
The analysts reason that the Ethereum EIP-4844 upgrade, also known as the Proto-Danksharding upgrade, is expected to take place during the first half of 2024 and is part of a multistep plan to make sharding more efficient on the Ethereum chain.
Though the process is complex, the idea is that it will allow shards to be analyzed in larger groups instead of a system that splits Ethereum into several shard chains. This upgrade will have a significant impact on Layer 2 solutions such as Polygon and Optimism. This is because it will allow these projects to have more access to network power, which will increase throughput and reduce transaction costs.
JPMorgan believes that these upgrades will bring more investors to Ethereum and cause it to regain market share in the crypto sphere.
JPMorgan is not saying that the price of Ethereum will appreciate. The analysts are "cautious" about crypto markets in 2024. They see Ethereum as one of the stronger tokens for 2024. While it may not go up in price, they still believe that it will perform better than other tokens, specifically Bitcoin.
Despite recent hype around spot Bitcoin ETF approvals and the upcoming Bitcoin halving, JPMorgan is still more bullish on ETH. The analysts believe that the spot Bitcoin ETFs are already priced in. Since approval seems imminent, they believe that markets have already priced in the impact this will have on Bitcoin. They cite the recent Bitcoin run-up as evidence for this.
They also think that the upcoming Bitcoin halving is already priced in. They looked at the ratio of Bitcoin's market price to production cost and saw that it decreased after the most recent halving in 2020. They expect a similar move will follow in 2024.
Other topics discussed in the report revolved around their lack of confidence in decentralized finance (DeFi). They have not seen noticeable impacts of DeFi on the current financial system.
"The biggest applications of blockchain to traditional finance, i.e. overnight repo transactions via smart contracts in blockchain platforms hosted by companies such as Broadridge and JPMorgan, take place outside public blockchains," the analysts said. They also discussed interoperability and central bank digital currencies.