Ether (ETH) Has Underperformed Other Cryptocurrencies in Recent Months, Wall Street Bank JPMorgan (JPM) Says

The token lacks a compelling narrative like that of its larger peer bitcoin (BTC, the bank said, adding that bitcoin benefits from its perception as a store of value and as digital gold.

The price of ether (ETH) has lagged behind other cryptocurrencies recently as the Ethereum blockchain faces “fierce” competition from other networks, Wall Street bank JPMorgan (JPM) said in a research note on Wednesday.

The token lacks a strong narrative compared to its larger peer bitcoin (BTC), the bank said, adding that bitcoin benefits from its perception as a store of value and digital gold.

Despite upgrades like Dencun, activity has shifted away from the main Ethereum network and onto layer 2’s, which is hurting the blockchain’s growth, the report said. The network’s next upgrade, Pectra, is due early April.

“Competitive pressures have led some decentralized applications (dapps) to migrate from Ethereum to other application-specific chains for better performance,” analysts led by Nikolaos Panigirtzoglou wrote.

Examples include decentralized exchanges (DEXs) like Uniswap, dYdX and Hyperliquid, the bank said.

Uniswap’s upcoming move to Unichain is important as it is one of Ethereum’s “largest gas consuming protocols,” and its migration could result in a significant loss to the network’s fee pool, the bank noted.

JPMorgan said this trend of dapps moving to other layer 2’s or alternative layer 1’s could hurt Ethereum by reducing activity on the main network, which could lead to lower transaction fees and validator revenue.

Layer 2’s are separate blockchains built on top of layer 1’s, or the base layer, that reduce bottlenecks with scaling and data. In terms of supply, this could make ether inflationary as “fewer transactions imply reduced token burning,” the authors wrote.

The bank noted that Ethereum’s growth lags behind competitors like Solana, which saw a surge in activity linked to memecoins.

The Ethereum ecosystem still dominates the stablecoin, decentralized finance (DeFi) and tokenization spaces despite these challenges, the bank said.

The network could see increased institutional demand from tokenization enterprises, but “competition from other networks is likely to remain intense for the foreseeable future,” the report added.