JPMorgan says ether and altcoins won't catch up to bitcoin without a major network boom

TL;DR

JPMorgan reports that ether and altcoins are unlikely to catch up to bitcoin without significant improvements in network activity and DeFi adoption. The cryptocurrency market has faced challenges due to rising interest rates and inflation concerns.

Key points

JPMorgan reports on ether and altcoin performance
Significant network improvements needed for recovery
Cryptocurrency market faces challenges from interest rates
Bitcoin ETFs have recovered more than ether ETFs
Momentum traders remain underweight in bitcoin and ether

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JPMorgan

Ether (ETH) and the broader altcoin market are unlikely to reverse a multi-year trend of underperformance against bitcoin BTC$76,697.85 without meaningful improvements in network activity, decentralized finance (DeFi) adoption and real-world use cases, JPMorgan said in a report last week.

Cryptocurrency markets have struggled for much of the past six months as rising interest rates, persistent inflation concerns and weak risk appetite weighed on digital assets. Bitcoin and ether both saw sharp drawdowns earlier this year alongside heavy exchange-traded funds (ETFs) outflows and broader deleveraging across the sector.

"Both ether and other altcoins have been underperforming bitcoin despite the crypto market recovery since the Iran conflict," wrote analysts led by Nikolaos Panigirtzoglou.

The analysts pointed to ETF flows as evidence of the divergence, noting that spot bitcoin ETFs have recovered roughly two-thirds of prior outflows, while spot ether ETFs have recovered only about one-third.

Momentum traders, including commodity trading advisors (CTAs) and crypto quant funds, also remain slightly underweight both bitcoin and ether, the report said, suggesting speculative investors have yet to rebuild sizable long positions.

Still, crypto prices have stabilized somewhat since the outbreak of the Iran conflict, with investors drawn to the market’s round-the-clock liquidity and signs of renewed institutional demand. Bitcoin and ether have at times outperformed equities and other risk assets during the conflict, even as volatility remains elevated.

Upcoming Ethereum upgrades, including Glamsterdam and Hegota in 2026, are designed to improve scalability and lower transaction costs. But the bank's analysts cautioned that previous upgrades failed to drive stronger onchain activity.

Instead, earlier upgrades reduced Layer 2 costs and network fees, weakening Ethereum’s token burn mechanism and increasing net supply, which undermined price support.

Other altcoins have also underperformed bitcoin since 2023 because of tighter liquidity conditions, weaker market depth and breadth, limited DeFi growth and repeated hacks and security breaches that have eroded investor confidence, the report added.

Repeated hacks and security breaches continue to weigh on crypto markets by undermining investor confidence, draining liquidity and slowing institutional adoption.

High-profile exploits in DeFi and across trading platforms have triggered capital outflows and raised concerns about the reliability of blockchain infrastructure, particularly for altcoins and decentralized applications.

Q&A

What did JPMorgan say about ether and altcoins compared to bitcoin?

JPMorgan stated that ether and altcoins are unlikely to reverse their underperformance against bitcoin without major improvements in network activity and DeFi adoption.

Why have cryptocurrency markets struggled recently?

Cryptocurrency markets have struggled due to rising interest rates, persistent inflation concerns, and weak risk appetite, leading to significant drawdowns in both bitcoin and ether.

How have ETF flows affected bitcoin and ether performance?

ETF flows show that spot bitcoin ETFs have recovered about two-thirds of prior outflows, while spot ether ETFs have only recovered one-third, indicating a divergence in performance.